I’ll go step by step: set the assumptions, do the math for both options, compare pros & cons, and conclude with what I’d personally lean toward (with caveats). Please feel free to challenge, ask follow-ups, or bring your own scenarios.
Setting the scene & assumptions
First, what do we mean by ₹20,000/month from ₹20,00,000 (₹20 lakh)? That means you want a yield / withdrawal rate = 12% annually.
So you are trying to get 12% per annum effective income (in some form) from your capital. That’s a high target, considering typical safe-return avenues in India today.
To evaluate, we need realistic interest / return rates for FDs and also plausible assumptions for mutual funds + SWP (Systematic Withdrawal Plan). Also, taxation, volatility and safety matter.
Let’s gather some reference rates first…
Here are some current FD rates in India (for regular investors, non-senior citizens):
- HDFC Bank: ~6.15% – 6.65% p.a. (HDFC Bank)
- ICICI Bank: up to ~6.60% p.a. (ICICI Bank)
- IndusInd Bank: ~6.75% (1–3 years) (IndusInd Bank)
- IDFC First Bank: up to ~7.00% p.a. (IDFC First Bank)
So realistically, for ₹20 lakh, you might find an FD rate around 6.0% to 7.0% p.a. (or a little higher for special schemes or senior citizens).
If you invest ₹20 lakh in an FD at 7% p.a., the annual interest is:
₹20,00,000 × 7% = ₹1,40,000 per year
Divided by 12, that’s about ₹11,666 per month — well short of ₹20,000.
So, FD alone cannot reliably generate ₹20,000 every month unless you take higher risk or use non-bank instruments.
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What is SWP (Systematic Withdrawal Plan)?
SWP means investing a lump sum in mutual funds and withdrawing a fixed amount monthly or quarterly by redeeming units. Part of the withdrawal is capital, and part is capital gain/loss. (Groww)
Key benefits of SWP:
- Flexibility: Choose your amount, frequency, and duration. (Mirae Asset)
- Tax efficiency: Only the gains portion is taxed as per capital gains rules. (Bank of Baroda)
- Capital growth potential: Unused corpus stays invested and grows. (ICICI Bank)
- Risks: Market volatility, corpus erosion if withdrawals exceed returns. (ElearnMarkets)
SWP offers higher potential returns but also higher risk than FDs.
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Comparison: FD vs SWP
Criteria | FD (Fixed Deposit) | SWP (Mutual Fund) |
---|---|---|
Safety | Very high (insured, fixed rate) | Market-linked, riskier |
Return potential | 6–7% typical | 8–12% possible (long-term) |
Tax | Interest taxed at slab rate | Capital gains tax only on profit portion |
Flexibility | Low (fixed tenor) | High (can pause or modify) |
Inflation protection | Weak | Better chance to beat inflation |
Corpus stability | Principal intact | May erode in bad markets |
Which is better?
- FDs are safe but returns are too low to meet ₹20,000/month target.
- SWP can meet the target with moderate risk and smart fund selection.
- Hybrid plan: Combine both — part FD (safety), part SWP (growth & income).
- Example: ₹8 lakh in FDs + ₹12 lakh in mutual funds with SWP for ₹20,000/month.
- Be flexible — reduce withdrawals during bad years to preserve corpus.
Summary
- FD: Safe, predictable, but low yield (6–7%).
- SWP: Higher income potential, but comes with risk.
- Best option: Mix of both for steady + sustainable monthly income.
💬 Your Turn!
What’s your choice — the safety of FD or the flexibility and higher growth of SWP? Share your opinion in the comments below. Don’t forget to share this post with friends or family planning for steady monthly income!