How can i withdraw my interest money from fixed deposit (FD)?

Fixed Deposits are one the most common and sought-after financial instruments in India due to their unparalleled safety and guaranteed returns feature. Millions in India, especially the senior citizens, trust these devices with their life savings.

One of the features that make fixed deposits a completely unique financial instrument is the ability to withdraw interest income during the tenure of FD. Such FDs are called non-cumulative FD, and the tenure can range between 12 months to 120 months.

How to Withdraw Interest Income?

As an investor in fixed deposit, you have the option to withdraw interest income on a monthly, quarterly, semi-annually, and yearly basis. Give standing instructions to the bank at the time of opening of FD account. You can then receive interest income to your savings bank account at a fixed date. It is the amount you can withdraw from your savings account at will.

Non-cumulative FDs are not the best FD option as you lose the benefit of compounding interest. But it is suitable for those looking for a regular and steady flow of income, such as retirees and pensioners, to meet their monthly expenditure.

How to Calculate Interest Income Payout?

Banks usually offer interest payout on only the quarter, semi-annual, and annual time periods because the interest calculation by banks on fixed deposits are done quarterly.

However, on request to the bank, you can get a monthly interest payout. The interest amount in monthly payout FDs are offered at discounted rates compared to other intervals as the interest is obtained in advance. You can estimate your interest income from monthly payout FDs using the fixed deposit calculator.

Following are the steps involved:
  1. Visit the online website of the bank you wish to have FD account with.
  2. Select the best Fixed Deposit scheme as per your convenience.
  3. Then, select the FD calculator option, if not there, you can use any other online FD calculator.
  4. Enter the desired amount you wish to deposit and the tenure of the deposit.
  5. Select interest payout interval to monthly.
  6. The calculator will then estimate your monthly interest income against the FD’s interest rate.

Under the tax-saving FD option, interest payout at regular interval is not allowed due to a lock-in period of 5 years.

Tax Treatment of Interest Income

The interest income is not subject to any income tax benefit and is subject to TDS at a prevalent rate if Form 15G/15H is not submitted.

The assessee needs to show interest income under the head “Income from Other Sources” during income tax return filing. The calculation of tax liability on interest income in non-cumulative FDs is an easy process compared to cumulative FDs.


Withdrawing interest money from an FD is a very easy process, and banks must be intimated about the payout frequency at the time of opening of the FD account. Choosing the payout frequency is the key to maximise returns as you get less interest under the monthly option as opposed to the quarterly and half-yearly options.

Despite certain disadvantages like less interest payout over cumulative FD, non-cumulative FD continues to be the most suitable investment option. As mentioned above, it is best suited for retirees and pensioners, who can invest in a lump sum at a time and earn higher interest income.

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