Want to earn good money apart from a job? Then this article is for you. If you’re looking to create a monthly income on the side of your regular job, the Annuity Deposit Scheme offered by banks could be a solid choice. Also known as the annual deposit scheme, this allows you to put in a one-time lump sum and receive a nice monthly payout along with interest.
Right now, the annuity deposit scheme is providing an annual interest rate ranging from 4% to 7.60%. Let’s break down how you can generate an income between Rs 9,250 and Rs 15,000 each month with this scheme:
What’s the annuity deposit scheme all about?
In addition to term deposits, many major banks in the country offer special deposit schemes that let customers earn interest on their savings. One of these is the annuity deposit scheme (like the SBI annuity deposit scheme). The unique feature of this scheme is that you need to make a one-time deposit. After that, you’ll receive a guaranteed monthly income along with interest. You can open this account either individually or jointly.
With this scheme, you get paid interest every month along with your principal, and the interest is calculated on a compounding basis every quarter. The interest rate is similar to that of the bank’s fixed deposits (FD). For example, if you deposit Rs 5 lakh in an annuity deposit for 3 years, you could earn at least Rs 15,000 each month by combining the interest with your principal.
How long does the annuity last?
1. According to SBI’s official website, in the Annuity Deposit Scheme, you make a one-time lump sum deposit and then receive both the principal and interest as monthly installments.
2. You can choose to make a lump sum deposit for 36, 60, 84, or 120 months (which is 3, 5, 7, or 10 years).
3. There’s no cap on the maximum deposit, but the minimum monthly annuity is Rs 1,000.
How long does the annuity last in months or years?
1. According to SBI’s official site, the Annuity Deposit Scheme requires customers to make a one-time lump sum deposit, after which they receive both the principal and interest as monthly payments.
2. You can choose to make a lump sum deposit for periods of 36, 60, 84, or 120 months (which translates to 3, 5, 7, or 10 years).
3. There’s no cap on the maximum deposit amount, but the minimum monthly annuity is set at Rs 1000.
How do you make money each month?
Payments are made on a fixed date in the following month after the deposit. If a month doesn’t have the 29th, 30th, or 31st (like February), the annuity will be credited on the 1st of the next month. The annuity payment goes into your linked savings or current account after TDS is deducted. SBI also offers a nomination option in the Annuity Deposit Scheme, and customers receive a universal passbook. Plus, you can transfer your account between branches for your convenience.
What’s the current interest rate and for how long?
For annuities lasting 7 to 45 days, SBI offers 3.50% interest, with a higher rate of 4% for senior citizens. For annuities from 46 to 179 days, the interest is 5.50% for regular customers and 6.00% for seniors. If the annuity is between 180 to 210 days, regular customers earn 6.00% while seniors get 6.50%. For deposits from 211 days to 1 year, the interest is 6.25% for general customers and 6.75% for seniors. For deposits between 1 to 2 years, the rates are 6.80% for regular customers and 7.30% for senior citizens. Lastly, for deposits from 2 to 3 years, general customers receive 7.00% interest, while seniors get 7.50%.
For deposits ranging from 3 to 5 years, the general public will receive an interest rate of 6.75%, while senior citizens will enjoy a higher rate of 7.25%. For annuities lasting between 5 to 10 years, ordinary citizens can expect an interest rate of 6.50%, whereas senior citizens will benefit from a rate of 7.50%. Additionally, if you opt for an annuity of 400 days, common citizens will earn 7.10% interest, and senior citizens will receive 7.60%. These new interest rates will take effect on June 14, 2024.
You can also access an overdraft of up to 75% of your annuity balance. If necessary, you may take a loan or overdraft up to this amount, and your annuity payments will be directed to the loan account. Furthermore, the scheme allows for early closure in the event of the depositor’s death.
Pre-payment options are available as well. You can make pre-payments for deposits up to Rs 15 lakh, but a pre-maturity penalty will apply, similar to that charged on fixed deposits. This scheme also imposes a pre-maturity penalty in accordance with term deposit regulations.