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LIC Fixed Deposit Monthly Income Plan

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Fixed deposits, a cornerstone of traditional investment avenues, refer to fixed income products offered by a range of lenders — banks, non-banking financial companies (NBFCs), and post offices. These instruments have long been revered for their security, reliability, and assured returns.

Among the myriad of players in this domain is the Life Insurance Corporation (LIC) of India, which has introduced its own rendition—the Fixed Deposit Monthly Income Plan.

You might think, why does this LIC offering stand out?

Well, besides being backed by the trust and legacy of LIC, it is specifically tailored for those who seek regular monthly incomes, making it a prudent choice for many.

Let’s understand the LIC Housing Finance Limited Fixed Deposits in more detail in the article below.

Features of LIC Fixed Deposit Monthly Income Plan

The LIC Fixed Deposit Monthly Income Plan is a standout offering in the fixed deposit arena, thanks to its suite of features tailored to meet the diverse requirements of investors. These features not only provide flexibility but also ensure a hassle-free experience for depositors.

Let's take a look at the salient aspects of this plan -

1. Auto Repayment and Renewal

Repayment: Once your LIC Monthly Income Plan reaches maturity, the maturity amount is electronically transferred to the bank account provided during the initial application. Interestingly, the maturity value of non-cumulative deposits remains equal to the principal since the interest has been previously received.

Renewal: For those who have chosen the auto-renewal feature, the principal amount is automatically renewed for the same deposit period post-maturity. The renewed fixed deposit retains the original features, although the interest rate that applies is as per the rate effective on the renewal date.

2. Premature Withdrawal

This feature enhances the plan’s flexibility and allows you to early account closure. However, the discretion lies with LIC management in alignment with RBI’s NBFC-HFC Directions of 2021. The interest rates due to premature withdrawal are as follows - 

  • Less than three months (as per lock-in rules): No interest.
  • 3 to 6 months: 3% p.a. for individual depositors; none for others.
  • 6 months to maturity: Interest rate is reduced by 1% from the card rate for that period or by 2% if no such rate is applicable.

3. Nomination

This feature is available to individual depositors, either alone or jointly. Nomination in the name of a minor is facilitated by an individual legally representing the minor. A Power of Attorney holder or representative, however, cannot nominate. The nominee is empowered to receive due payments, clearing LICHFL of any further liabilities.

4. KYC Compliance

Compliance is mandatory as per RBI's NBFC-HFC Directions, 2021, and the Prevention of Money Laundering Rules, 2002. Essential documents for this include a recent photograph, self-attested copies of PAN, identity and address proofs, and a filled KYC form. If previous deposit compliance exists and details remain unchanged, citing the folio number will suffice.

5. Loan Facility

Post 3 months from the deposit date, a loan application can be made against the FD under the housing finance category. The loan amount can be up to 75% of the deposit, with an interest rate of 2% above the FD interest rate. 

6. TDS and Taxation

The interest from the LIC FD Monthly Income Plan is taxable. TDS rates stand at 10% (with PAN) and 20% (without PAN) during interest disbursement. Tax deductions of up to INR 40,000 (INR 50,000 for senior citizens) can be claimed on the interest earned. Additionally, a 5-year LIC FD qualifies for tax exemption under Section 80C of the Income Tax Act, 1961.

Other Details of LIC Fixed Deposit Monthly Scheme

The life insurance Corporation (LIC) has structured a comprehensive fixed deposit scheme named ‘Sanchay’. Tailored to provide flexibility to a diverse range of depositors, this public deposit scheme brings forth an amalgamation of investment options and beneficial features. 

Here's an overview of the key details of the Sanchay scheme -

  1. Scheme Name: The fixed deposit scheme under LIC is titled "Sanchay."
  2. Type: It is categorised as a Public Deposit, ensuring accessibility to a broad segment of the population.
  3. Options Available: Depositors have the choice between Cumulative and Non-Cumulative options to suit their financial goals.
  4. Minimum Deposit: For the Non-Cumulative Annual Option, a minimum deposit of INR 20,000 is required — any further deposits can be made in multiples of INR 1,000. For the Monthly Option, the starting deposit stands at INR 2 Lac, with subsequent additions possible in multiples of INR 10,000.
  5. Tenor: Depositors can choose from various durations, namely 1, 1.5, 2, 3, and 5 years, as per their investment horizon.
  6. Interest Payment: Those opting for the Cumulative scheme will receive their interest upon maturity, with the interest compounding annually. Meanwhile, the Non-Cumulative scheme pays out interest either monthly or annually, depending on the depositor's preference.
  7. Premature Withdrawal: While it's allowed, any early withdrawal is bound by the prevailing rules of the scheme.
  8. Loan against Deposit: A significant benefit of this plan is the provision to secure a loan — up to 75% of the deposited amount — which gives significant financial agility to depositors.
  9. Renewal: Depositors have the flexibility to renew their deposits once they mature.
  10. Nomination: The scheme also provides the advantage of nominating a beneficiary for the deposited amount, simplifying the transfer process in unforeseen circumstances.

Eligibility Criteria for LIC Fixed Deposit Monthly Scheme

A wide range of individuals and entities can avail of this scheme. This includes resident and NRI individuals, Hindu Undivided Families (HUF), Partnership Firms, Association of Persons, Co-operative Societies, Proprietary Concerns, Trusts, and more. Additionally, other categories may also be considered as deemed fit by the management from time to time.

Interest Payment Options for LIC Fixed Deposit Monthly Income Plans

The LIC Fixed Deposit Monthly Income Plan provides great flexibility when it comes to interest payments. It allows depositors to align their investments with their financial needs and cash flow preferences. 

The interest payment modalities provided by the plan are given below -

  • Annual Option
    • Depositors can choose to receive their interest through either an electronic transfer or an interest warrant. This is done after adjustments for TDS.
    • The interest disbursement is scheduled annually on 31st March.
    • For those who opt for a cumulative deposit, the interest gets compounded on an annual basis.
  • Monthly Option
    • Unlike the annual option, monthly interest payments are exclusively carried out through electronic transfers after making necessary TDS adjustments.
    • The interest gets credited on the 1st day of every month, with an additional payment on 31st March.
  • Additional Features
    • Senior citizens are entitled to a bonus in their interest earnings. They receive an extra 0.25% per annum over the standard card rate.
    • Depositors can invest amounts up to INR 20 Cr, either from the 1st to the 15th or from the 16th to the end of the month, at the prevailing card rate.
    • If your deposit goes beyond INR 20 Cr within the specified intervals, the interest rate applicable would then be based on the slab that caters to deposits above INR 20 Cr.

Interest Rates of LIC Fixed Deposit Monthly Income Plans

Undoubtedly, the pivotal draw for investors when considering fixed deposits lies in the interest rate promised. The LIC FD Monthly Income Plan is crafted for those who seek to derive their interest on a routine basis, which, in this scenario, is on a monthly basis.

LIC Housing Finance Limited (LICHFL) offers this non-cumulative deposit scheme to help you cash out the interest either on a monthly or yearly cycle, depending on your financial strategy and particular requirements.

Tabled below is a breakdown of the prevalent interest rates for the Monthly Income Plan as of May 2022.

Non-Cumulative Deposit Interest Rates (Effective from May 2022)

Tenor Up to INR 20 Cr (Monthly) Up to INR 20 Cr (Annual) Above INR 20 Cr (Monthly) Above INR 20 Cr (Annual)
1 Year 5.45% 5.6% 4.85% 4.95%
18 Months 5.75% 5.9% 5.15% 5.25%
2 Years 6.1% 6.25% 5.5% 5.6%
3 Years 6.25% 6.4% 5.65% 5.75%
5 Years 6.45% 6.6% 5.85% 5.95%

All the mentioned rates are on an annual basis.

Note: The listed interest rates can undergo changes. It's advisable to consult the LICHFL's official website for the most recent updates on interest rates.

Important: Interest accrual on the deposit commences from the exact date when funds reach the LICHFL account, irrespective of the mode used – whether it is cheque, RTGS, NEFT, or IMPS.

Documents Required for LIC Fixed Deposit Monthly Income Plan

Meeting the KYC (Know Your Customer) requirements is essential for initiating the LIC FD Monthly Income Plan. For first-time investors, the documents listed below are crucial. It's important to note that the company accommodates both individual and joint account openings. 

For joint accounts, a depositor must provide these documents -

  • A completed and duly signed FD application form
  • Two recent passport-size colour photographs
  • A photocopy of the PAN card
  • Proof of Identity, which can include documents like the Aadhaar card, Driving Licence, and Passport among others
  • Proof of Address, which can be any official document containing the address, or even a recent utility bill
  • Proof of Age, which can be derived from identity documents, birth certificates, and school or board leaving certificates

Check out some FAQs related to the LIC fixed deposit monthly income plan.

Frequently Asked Questions

Q1. Is it possible to add more money to an existing LIC FD Monthly Income Plan?

Ans: LICHFL doesn't permit you to add funds to an already-existing FD. However, you can start a new FD. It's noteworthy that the DICGC, under the RBI's Deposit Insurance Scheme, safeguards deposits up to INR 5 Lac.

Q2. How do LIC FD Monthly Income Plan interest rates stack up against bank FD rates?

Ans: Presently, interest rates on LIC FDs for comparable periods are higher than those provided by most banks.

Q3. What happens if I don't provide my PAN card when setting up the LIC FD Monthly Income Plan?

Ans: Without a PAN card, the TDS rate applied is 20%, compared to the usual 10%. On top of that, a few other implications will be there - 

  • You won't receive a TDS certificate.
  • You won't get a tax credit for the deducted TDS.
  • All certificates claiming tax exemptions will be rendered invalid.
Q4. Is there a tenure cap for NRI depositors in the LIC FD Monthly Income Plan?

Ans: NRI depositors can invest for up to 3 years as per the current guidelines. There's no restriction on the deposit amount.

Q5. How can I figure out if my interest earnings from the LIC FD Monthly Income Plan fall below or above the TDS limit?

Ans: You can use tools like the FD calculator or the Income-tax calculator to gauge your interest earnings and ascertain your tax obligations.

Q6. Is there a minimum deposit requirement for the LIC FD Monthly Income Plan?

Ans: Yes, there's a set minimum deposit amount, which varies based on whether you're opting for the annual or monthly option. Make sure to refer to the specific terms when initiating your deposit.

Q7. Can I avail a loan against my LIC FD Monthly Income Plan?

Ans: Absolutely! You can apply for a loan against your LIC FD. However, there are certain conditions like the duration after which you can apply and the maximum amount eligible. Always consult the specific terms before proceeding.

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