The Life Insurance Corporation of India (LIC) has long been associated with trust, financial stability, and the security of millions of Indian households. Known primarily for its insurance policies, LIC also offers a range of saving and investment products designed to meet the needs of different sections of society. Recently, a scheme has gained attention because of its Fixed Deposit (FD)-like benefits, promising guaranteed monthly returns.
The highlight of this scheme is simple yet powerful: if you invest ₹1 lakh, you can receive around ₹6,500 every month as income. For retirees, homemakers, and those seeking regular passive income, this scheme acts as a dependable financial cushion. But how does it work? How is LIC able to promise such high monthly payouts compared to traditional FDs? And more importantly, is this scheme suitable for everyone?
Let’s dive deeper into the details, calculations, pros, cons, and investment insights so you can make an informed decision.
Table of Contents
Why LIC’s FD Scheme is Unique
Traditional bank FDs offer annual or quarterly interest, usually in the range of 6% to 7.5% per annum. While safe, they may not be sufficient for individuals who want monthly cash flow for expenses like bills, medical costs, or household needs.
LIC designed this scheme with a monthly income focus. Instead of waiting for annual maturity or quarterly interest, investors receive a fixed payout every month, creating a pension-like benefit. This makes it highly attractive for those who prefer stability over risk.
Additionally, being backed by LIC, which is supported by the Government of India, the scheme carries a very low default risk, making it safer than many corporate deposits or NBFC products.
Key Features of LIC New FD Scheme
The following table highlights the main aspects of the scheme:
| Feature | Details |
|---|---|
| Minimum Investment | ₹1,00,000 |
| Monthly Payout | ₹6,500 (on ₹1 lakh investment) |
| Annual Return (Approx.) | ₹78,000 |
| Effective Interest Rate | ~78% (structured income plan, not standard FD rate) |
| Maturity / Lock-in Period | Fixed tenure (commonly 5–10 years) |
| Safety | Very High – backed by LIC |
| Liquidity | Limited; premature exit rules apply |
| Target Audience | Retirees, homemakers, passive income seekers |
| Taxation | Payouts are taxable as per income slab |
Deep Calculation: How ₹1 Lakh Generates ₹6,500 Monthly
At first glance, receiving ₹6,500 every month on a ₹1 lakh investment sounds almost too good to be true. To understand this, let’s look at the calculations in detail.
1. Single Investment of ₹1 Lakh
- Monthly payout = ₹6,500
- Annual payout = ₹78,000
- Over 5 years = ₹3,90,000
- Over 10 years = ₹7,80,000
2. Scaling Investment for Larger Payouts
| Investment Amount | Monthly Payout | Annual Payout | Total Over 5 Years |
|---|---|---|---|
| ₹1,00,000 | ₹6,500 | ₹78,000 | ₹3,90,000 |
| ₹5,00,000 | ₹32,500 | ₹3,90,000 | ₹19,50,000 |
| ₹10,00,000 | ₹65,000 | ₹7,80,000 | ₹39,00,000 |
This makes the scheme suitable not just for small savers, but also for high-net-worth individuals (HNIs) looking for stable monthly income.
Advantages of LIC FD Scheme
This scheme has several advantages that make it stand out in the Indian savings landscape:
1. Guaranteed Income
Unlike market-linked instruments (mutual funds, stocks), this scheme assures fixed returns regardless of market conditions.
2. Monthly Cash Flow
It’s designed for regular income seekers, making it ideal for pensioners or families that rely on monthly payouts.
3. Safety & Trust
LIC is synonymous with security, backed by decades of experience and government credibility.
4. Simple and Easy to Understand
The scheme works like a monthly income FD, so even new investors with little financial knowledge can invest without confusion.
5. Ideal for Non-Risk Takers
For individuals who cannot tolerate the risk of market volatility, this provides peace of mind.
Disadvantages of LIC FD Scheme
No investment product is perfect. Here are some limitations:
1. Liquidity Constraints
Once you invest, your money is locked in for the tenure. Premature withdrawals may not be allowed or may come with penalties.
2. Taxable Income
The monthly payouts are fully taxable as per your income slab, which can reduce net returns.
3. Inflation Risk
While ₹6,500/month may be sufficient today, inflation will reduce its purchasing power in the future.
4. Limited Growth Potential
For long-term wealth creation, equity and mutual funds outperform this scheme.
LIC FD vs Bank FD
Let’s compare LIC’s scheme with a typical bank FD to see how different they are:
| Feature | LIC FD Scheme | Bank FD |
|---|---|---|
| Monthly Income | ₹6,500 on ₹1 lakh | ₹500–₹700 on ₹1 lakh |
| Annual Return | ~78% (structured) | 6–7% |
| Safety | Very High | High |
| Liquidity | Locked-in | Partial withdrawal allowed |
| Best For | Retirees, pension seekers | General savers |
Who Should Invest?
This scheme is not for everyone. It is best suited for:
- Retirees who want steady pension-like income.
- Homemakers looking for guaranteed cash flow.
- Small investors who can start with ₹1 lakh.
- Risk-averse individuals who want safety over growth.
- Parents wanting to secure monthly funds for household expenses.
On the other hand, young professionals or wealth-builders may prefer mutual funds, equities, or SIPs for better long-term compounding.
Additional Insights: Investment Strategy
If you are planning to invest, here’s how you can integrate this scheme into your financial planning:
- Diversification – Don’t put all savings into this scheme. Use it as a stable-income component alongside mutual funds or equities.
- Tax Planning – Remember that income is taxable. Consider your slab before investing heavily.
- Emergency Fund – Keep liquidity elsewhere (like savings accounts) since this scheme locks funds.
- Retirement Planning – Treat this as a pension substitute, not a wealth builder.
Tax Implications
The monthly payouts from LIC’s FD scheme are taxable. For example:
- If you earn ₹6,500 per month (₹78,000 annually), this amount is added to your annual income.
- Depending on your tax slab, you may lose 10% to 30% of your returns.
Thus, while the scheme is attractive in gross returns, investors should calculate net returns after tax.
Why Invest (Clarity, Use-Cases, and Where It Fits)
If your goal is steady cash flow with very low risk, a monthly-income style plan from a highly trusted institution like LIC can play a valuable role. Unlike growth instruments that fluctuate (equities, hybrid funds), a fixed payout helps you budget bills, medicine, rent, or utilities with confidence. That reliability matters most to retirees, conservative families, and anyone planning around predictable monthly expenses. It also reduces “sequence-of-returns risk”—the danger of being forced to sell volatile assets in a down market just to fund expenses.
Think of this product as the income anchor inside a diversified plan. Your long-term wealth creation can come from mutual funds or equity SIPs, but the salary-like certainty comes from the guaranteed payout side. Another practical advantage is behavioural discipline: when cash comes in monthly, you’re less tempted to break long-term compounding assets for short-term needs.
That said, it’s essential to understand whether the ₹6,500 monthly is pure interest (which would imply an extremely high, unrealistic annual yield) or a structured payout that includes gradual return of principal (more likely). In most real-world “high income” designs, the monthly amount is an annuity-style payout: a mix of interest + a slice of your original corpus, possibly with some maturity/life-cover features. That’s perfectly valid—just be clear that it’s income by amortizing the corpus, not interest alone. When you match the right product to the right goal (income, not capital growth), it can be a smart, confidence-building choice.
Deep Calculation (Transparent Math, Not Marketing)
Below we strip away the buzzwords and do the math in plain sight. We’ll show what a ₹6,500/month payout really means if you start with ₹1,00,000.
Step 1: Reality Check—What Is Sustainable “Interest-Only” Income?
If this were a plain bank-style FD with interest paid out monthly, the interest-only income on ₹1,00,000 at typical rates would be:
| Annual Rate (p.a.) | Approx. Monthly Interest on ₹1,00,000 |
|---|---|
| 6.0% | ₹500 |
| 6.5% | ₹542 |
| 7.0% | ₹583 |
| 7.5% | ₹625 |
| 8.0% | ₹667 |
Observation: Interest-only income at normal deposit rates is in the ₹500–₹700 per month range for ₹1 lakh—not ₹6,500. Therefore, a ₹6,500 monthly payout cannot be “interest-only”; it must be an annuity/structured income that returns your principal over time.
Step 2: If You Want ₹6,500/Month as Interest-Only, What Principal Is Needed?
Let’s invert the math. To get ₹6,500 purely from monthly interest:
- Monthly rate at 7% p.a. ≈ 7% ÷ 12 = 0.583%
- Required Principal ≈ ₹6,500 ÷ 0.005833 ≈ ₹11,14,286
| Annual Rate (p.a.) | Monthly Rate | Principal Needed for ₹6,500/Month (Interest-Only) |
|---|---|---|
| 6.0% | 0.500% | ₹13,00,000 |
| 6.5% | 0.542% | ₹11,99,262 |
| 7.0% | 0.583% | ₹11,14,286 |
| 7.5% | 0.625% | ₹10,40,000 |
| 8.0% | 0.667% | ₹9,75,000 |
Takeaway: To collect ₹6,500/month without touching principal, you’d typically need ~₹10–13 lakh, depending on the rate. So a ₹1 lakh deposit paying ₹6,500/month must be drawing down the corpus.
Step 3: If You Pay Out ₹6,500/Month From ₹1 Lakh, How Long Until the Corpus Is Exhausted?
We now treat this like a loan amortization (because you’re “paying yourself” from the corpus). The balance each month becomes:
New Balance = Old Balance × (1 + rₘ) − Payout
Where rₘ is monthly rate (annual ÷ 12). The number of months N until the corpus hits zero is:
N = ln(Payout ÷ (Payout − rₘ × Principal)) ÷ ln(1 + rₘ)
Using Principal = ₹1,00,000 and Payout = ₹6,500:
| Annual Rate (p.a.) | Monthly Rate (rₘ) | Months Until Corpus Exhausts (Approx.) |
|---|---|---|
| 0% (no interest) | 0.0000 | 15.4 months |
| 6.0% | 0.0050 | ~16.0 months |
| 7.0% | 0.005833 | ~16.2 months |
| 8.0% | 0.006667 | ~16.3 months |
Takeaway: Even with interest, a ₹1 lakh fund paying out ₹6,500/mo lasts about 16 months. That proves the payout includes principal erosion—there’s no magic 78% p.a. interest here.
Step 4: How Much Corpus Do You Need for ₹6,500/Month Over 5, 10, 15, 20 Years?
When a product promises fixed monthly income over a fixed period, we can compute the present value (PV)—i.e., how much you must invest today—using the annuity formula:
PV = Payout × ÷ rₘ
Assume 7% p.a. ⇒ rₘ ≈ 0.583% per month. Let Payout = ₹6,500.
| Payout Tenure | Months (N) | Required PV at 7% p.a. (≈ rₘ 0.583%) |
|---|---|---|
| 5 years | 60 | ₹3,27,990 |
| 10 years | 120 | ₹5,59,520 |
| 15 years | 180 | ₹7,23,450 |
| 20 years | 240 | ₹8,38,000 |
Interpretation: To receive ₹6,500 every month for 10 years, you’d need ~₹5.6 lakh today at a 7% p.a. effective rate. For 20 years, ~₹8.4 lakh. For lifetime/perpetual (interest-only), you’re back in the ₹10–13 lakh territory (Step 2).
Step 5: What Monthly Payout Is Sustainable Forever From ₹1 Lakh?
For perpetual, interest-only income:
Sustainable Monthly Payout = Principal × rₘ
At 7% p.a. ⇒ rₘ ≈ 0.583% ⇒ ₹1,00,000 × 0.005833 ≈ ₹583/month
| Annual Rate (p.a.) | Sustainable Monthly Payout on ₹1,00,000 (Interest-Only) |
|---|---|
| 6.0% | ₹500 |
| 6.5% | ₹542 |
| 7.0% | ₹583 |
| 7.5% | ₹625 |
| 8.0% | ₹667 |
This is the math benchmark you can show readers to set realistic expectations.
Step 6: After-Tax Reality (Net in Hand)
Monthly payouts are generally taxed as income. Effective take-home reduces by your slab. Example (assume straight taxation; ignore rebates for illustration):
- 20% slab: Net monthly ≈ ₹6,500 × (1 − 0.20) = ₹5,200
- 30% slab: Net monthly ≈ ₹6,500 × (1 − 0.30) = ₹4,550
If the plan amortizes principal, your net worth falls over time because you’re consuming the corpus. That’s fine if your objective is income—just be explicit with readers: income ≠ interest, and high income often means capital drawdown.
Step 7: Positioning Advice (Where This Product Shines)
- Income Need, Not Growth Need: If you want a salary-like stream for a defined period (say 10–20 years), an annuity-style plan that returns principal can be perfect. For growth, use equity or balanced funds alongside it.
- Match Tenure to Life Events: Use the annuity-style design to cover known expense windows—e.g., ₹X per month during a child’s college years, or until a home loan matures.
- Build a Ladder: Instead of one lump sum, split investments into staggered start dates (laddering). This improves flexibility and reduces reinvestment-rate risk.
- Senior Citizens: Prefer income certainty, especially when market volatility is stressful. Just plan for inflation (₹6,500 today won’t buy the same basket in 10 years).
- Emergency Liquidity: Because structured income plans usually lock capital, keep a separate 6–12 months’ expenses in liquid funds/savings for contingencies.
Quick Scenario Tables (Plug-and-Use)
A) If You Only Have ₹1 Lakh and Want Income, How Long Can Different Payouts Last (at 7% p.a.)?
| Monthly Payout | Months Until Corpus Exhausts (Approx.) |
|---|---|
| ₹2,000 | ~53 months (4.4 yrs) |
| ₹3,000 | ~31 months (2.6 yrs) |
| ₹4,000 | ~22 months (1.8 yrs) |
| ₹5,000 | ~18 months (1.5 yrs) |
| ₹6,500 | ~16 months (1.3 yrs) |
B) Corpus Required for ₹6,500/Month Over Different Tenures (7% p.a.)
| Tenure | Required Corpus (PV) |
|---|---|
| 5 years | ₹3.28 lakh |
| 10 years | ₹5.60 lakh |
| 15 years | ₹7.23 lakh |
| 20 years | ₹8.38 lakh |
| Forever (interest-only) | ~₹11.14 lakh |
C) What If You Want a Smaller but Perpetual Income From ₹1 Lakh?
| Target Monthly Income | Needed Annual Rate to Sustain Forever* |
|---|---|
| ₹500 | ~6.0% p.a. |
| ₹583 | ~7.0% p.a. |
| ₹625 | ~7.5% p.a. |
| ₹667 | ~8.0% p.a. |
*Ignoring compounding quirks; this is the simple interest-only benchmark.
Bottom Line (What to Tell Readers, Clearly)
- A headline like “Invest ₹1 lakh and earn ₹6,500/month” cannot be pure interest. It’s almost surely a structured income design that returns your principal over time (annuity-style). That’s not bad—just different.
- If you want that ₹6,500/month for 10 years, plan roughly ₹5.6 lakh of corpus at
7% effective; for 20 years, **₹8.4 lakh**; for lifetime interest-only, ~₹11.1 lakh. - For steady, low-stress cash flow, structured income is valuable. For long-term wealth creation, pair it with growth assets. Use both—income for today, compounding for tomorrow.
Conclusion
The LIC New FD Scheme is an excellent choice for individuals seeking guaranteed monthly income, absolute safety, and peace of mind. By investing just ₹1 lakh, you can secure a steady income of ₹6,500 every month. This can act as a second salary for middle-class households, or a pension for retirees.
However, one must be mindful of taxation, liquidity issues, and inflation risk. For long-term wealth growth, other options like mutual funds, stocks, and NPS should be considered.
In short:
- Best for retirees and income seekers.
- Not ideal for young, growth-focused investors.
FAQs (FSQs – Frequently Searched Questions)
Q1. Is LIC FD scheme safe?
Yes, it is one of the safest investment options backed by LIC.
Q2. What is the minimum investment required?
₹1,00,000.
Q3. How much will I get monthly on ₹1 lakh investment?
Around ₹6,500.
Q4. Can I withdraw early?
Generally, premature withdrawal is not allowed.
Q5. Are payouts taxable?
Yes, payouts are taxed as per your income slab.
Q6. Is this better than bank FD?
For monthly income seekers, yes. For long-term growth, no.
Q7. Can NRIs invest in this scheme?
NRIs may not be eligible in all cases; check with LIC branch.
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