One of the investments that suit most people is a Fixed Deposit or an FD. This has to do with the fact that FDs are safer than many other options, as they come with guaranteed returns. Senior citizens, in particular, love investing in them. And why not? After all, fixed deposits for senior citizens come with many special features and benefits that make them attractive.
Introduction to fixed deposits for senior citizens
Every bank offers fixed deposits (FDs) for senior citizens. These accounts come with some attractive features. One of them is that the FD interest rates for senior citizens are usually higher. That said, the interest rates vary from one bank to the other. As with all FDs, the variation is often due to many factors, such as tenure and deposit amount.
Features of fixed deposit schemes for senior citizens
Across banks, fixed deposits for senior citizens offer many interesting features. In this section, we highlight some of them.
The FD interest rates for senior citizens are usually higher. Moreover, the returns are guaranteed, irrespective of the market scenario or inflation.
Safe and secure investment
In our country, the Reserve Bank of India, RBI regulates all banks. This ensures the hard-earned money of senior citizens remains safe.
Periodic interest payout option
It is possible to select the frequency of the interest payout. One can opt for monthly, quarterly, or yearly payments.
Online booking via net banking
Senior citizens can choose an online account opening process. This helps address any mobility issues that senior citizens may have. Even if they are not a bank customer, they can place an account opening query online, and the representative will visit them.
Limit for deposits
The fixed deposit for senior citizens comes with a deposit limit, usually of ₹1 crore. The limit varies from bank to bank, but one is usually in place.
Details about fixed deposits for senior citizens
In addition to what we’ve discussed, you should remember a few more details. We’ll discuss some of those points here.
Minimum and maximum investment amount
The lowest amount you must deposit as an investment in your senior citizen FD depends from bank to bank, but it’s usually around ₹100. The upper limit also varies from one bank to the other.
Banks give customers a minimum and maximum tenure that they can choose from. Generally, the minimum is 7 days, while the maximum is 10 years. Seniors can select the tenure within this range.
Section 80TTB of the Income Tax Act says that senior citizens can claim a deduction of up to ₹50,000 on the interest income from these entities. So FDs help save your taxes.
Banks can charge a penalty in case you withdraw before maturity. However, despite this, FDs are quite advantageous because they at least allow premature withdrawals—something that many don’t offer. Due to this, FDs can double up as an emergency fund. Also, a few banks provide fixed deposits without a premature withdrawal benefit.
Loans against FD
Senior citizens can also use a fixed deposit as collateral to obtain a loan. The amount sanctioned depends on the principal deposit. It is usually a percentage of the principal, but the details differ from bank to bank.
While opening a fixed deposit account, senior citizens must mention a nominee. This is a way to protect any dependants’ interests while fulfilling senior investors’ wishes.
Senior citizen customers can benefit from auto-renewals at the time of maturity. However, the applicant needs to instruct the bank to implement the renewal. As age catches up and it gets harder to manage and or remember things, this feature ensures they can benefit from the older interest rate if they so desire.
Benefits of fixed deposits for senior citizens
Investing in an FDs has many benefits in one’s golden years. In this section, we take stock of them and summarize them for you.
Low risk, guaranteed returns, and maximum security
While investing in ELSS, mutual funds, and other high-risk investments may yield better returns, they depend on market volatility. FDs, on the other hand, are low-risk in many ways. First, the returns are guaranteed. And the government insures FDs worth up to ₹5 lakhs. So they are, therefore, very secure.
It also helps make for a more diversified investment portfolio. In this way, too, it boosts one’s risk protection.
FD is a good option for senior citizens as it isn’t market-linked. As a result, market fluctuations don’t affect senior citizens’ FD rates. That means you know what to expect from the investment and can plan better.
There are a lot of interest payout choices to choose from for senior citizens. We use FD interest for senior citizens on savings accounts based on monthly, quarterly, half-yearly, or yearly.
Monthly income option
Senior citizens can use the interest from FDs as a source of income by receiving their interest payout monthly. While some mutual funds allow you to do this, the risk is much lower here.
Any senior citizen of India can open this type of fixed deposit account. Primarily, the applicant needs to establish that they are over 60 years. In addition, they will need the following documents:
- Age proof document
- Passport or other address proof
- Aadhaar card
- PAN card
There are a few banks where customers of more than 55 years can apply for this fixed deposit. In addition, customers who have taken early or voluntary retirement can apply for this. The rules depend on the bank concerned.