Senior Citizen Fixed Deposits: What are the Benefits of a Senior Citizen Fixed Deposit Scheme?

Senior Citizen Fixed Deposits: What are the Benefits of a Senior Citizen Fixed Deposit Scheme?
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Senior Citizen Fixed Deposits: An Overview

The primary goal when investing as a senior person should be to reduce risk and provide assured profits. The wealth of senior citizens accumulated throughout the course of their work can only be protected through such a savings and investments mindset. Even though there are many investments geared at seniors, a fixed deposit is still a common option. A fixed deposit is a protected scheme for their retirement due to the security of investments and the guarantees of returns. To protect their wealth, the majority of investors who are retired or who are close to retirement choose this low-risk alternative. This article further examines in more detail what makes this instrument perfect for the needs of a senior citizen.

Understanding Fixed Deposits

In India, fixed deposits are considered one of the most popular investment options available in the market. A fixed deposit is considered interchangeably as an investment, in the common person’s perception conventionally, and the reason behind this is that FDs are considered safe, promise fixed returns, and have come in a variety of options according to the time period to suit the investor’s needs. 

Irrespective of the fluctuations in the interest rates or GDP performance, the returns promised by a fixed deposit are rock solid. It also helps its investors benefit from the compounding effect, by which, they are paid interest over their subsequent interests year over year.

Customers of banks and non-banking financial institutions (NBFCs) can invest their money in fixed deposits or FDs. People invest a specific amount of money through an FD for a specific amount of time and at a specific rate of interest. Although it varies from one financial institution to another, the rate of interest is often higher than the interest on savings accounts. Fixed deposits are offered for a variety of lengths, from extremely brief tenures of 7 to 14 days to very lengthy tenures of 10 years. A fixed deposit is sometimes also known as a term deposit.

Senior Citizen Age for Bank FDs

For people over 60, Senior Citizen Fixed Deposits (FDs) are among the most profitable investment options. Leading banks are providing these term deposit options with unique FD interest rates. Benefits like consistent returns, loans, and tax savings tag along with Fixed Deposits. When one invests in a Senior Citizen fixed deposit, they may stress-free enjoy their post-retirement years. Interest rates are typically 0.25 percent to 0.65 percent higher for senior citizens as compared to regular FD interest rates. Additionally, senior citizens also enjoy tax benefits on their savings in fixed deposits.

One must be a resident of India in order to open a senior citizen fixed deposit. Senior NRIs can open these FDs using their NRE or NRO accounts as well. The depositor's age must be at least 60 at the time the relevant fixed deposits account is opened. Customers who have taken early retirement and are older than 55 may be eligible to apply for this sort of FD plan with some banks. This regulation may differ from bank to bank and is constrained by particular terms and circumstances.

Eligibility Requirements

A senior citizen FD account can be opened by a resident of India. NRI residents can open such accounts with the help of NRE or NRO accounts.

The individual has to be above 60 years of age at the time of booking a fixed deposit. Some banks may even offer individuals of 55 years of age to avail of FD schemes if they have taken early/ voluntary retirement. Certain terms and conditions can be subjected to in such cases.

Documents Required

Mentioned down below are the documents required for opening senior citizen FD

  1. Identity proof ( senior citizen ID card, passport, PAN card, voter ID card, driving license, photo ration Card)
  2. Address Proof (passport, telephone bill, electricity bill, bank statement with cheque, certificate/ ID issued by Post Office)

Features of a Senior Citizen Fixed Deposit Scheme

For seniors with limited or inconsistent income after retirement, fixed deposits are secure investing possibilities. The key characteristics of the bank's senior citizen fixed deposit programs are:

  • The Senior Citizen FDs can serve anywhere between seven days and twenty years.
  • Interest rates are typically 0.25 percent to 0.65 percent higher for senior citizens as compared to regular FD interest rates.
  • Instead of quarterly compounding, banks may provide monthly, yearly, or semi-annual interest computations to senior citizens.
  • Senior citizens can invest in 5-year fixed deposits that save taxes by doing so. Section 80C of the Income Tax Act of 1961 allows them to claim a tax deduction of up to Rs. 1.5 lakh.

Taxation on Senior Citizen FDs

Based on applicable laws, interest earned on senior citizen FD can be liable for income tax. The taxes can be deducted at the source but in scenarios where you are liable to pay taxes, you can submit 15G or 15H forms to banks. If it is an NRE deposit, then it is not liable to taxes but for FCNR and NRO deposits, one becomes liable for taxes. 

What are the Benefits of a Senior Citizen Fixed Deposit?

Opening senior citizen fixed deposits has several advantages, the following being the most important ones:

  • They provide specific interest rates that are frequently higher, leading to increased income.
  • It provides a secure environment where the money may increase steadily.
  •  The interest on these savings may be converted into monthly payments. As a result, one's retirement years will be more peaceful.
  • Regular interest payment options might be a blessing for retirees because they provide an additional source of income.
  • The senior citizen fixed deposit has the potential to be a tax-saving investment that aids in obtaining tax deductions under section 80C of the IT Act.
  • Seniors have a variety of interest payment choices available to them, with interest being deposited to their savings accounts on a regular basis (monthly, quarterly, half-yearly, or annually).

Senior Citizen Fixed Deposit Interest Rates

The following table highlights the interest rates offered by various top banks for senior citizen fixed deposits as on 12 August 2022. These include the best-fixed deposit rates, the top performing banks in the market, and small banks which provide higher interest rates.

Bank NameInterest Rates (% p.a.)
Highest slab1-year tenure3-years tenure5-years tenure
Bank of Baroda6.505.806.006.15
Bank of India6.105.806.106.10
Bank of Maharashtra5.755.755.755.75
Canara Bank6.506.006.256.25
Indian Bank6.355.806.106.10
Indian Overseas Bank6.205.956.206.20
Punjab National Bank (PNB)6.255.806.006.25
Punjab & Sind Bank6.105.856.106.10
State Bank of India (SBI)6.305.805.956.30
UCO Bank6.105.555.805.80
Union Bank of India6.305.856.006.25
Axis Bank6.806.206.456.50
Bandhan Bank7.257.007.256.35
City Union Bank6.005.605.605.25
DBS Bank7.006.256.756.75
DCB Bank7.106.607.107.10
Dhanlaxmi Bank6.555.655.805.90
Federal Bank6.605.956.256.40
HDFC Bank6.505.856.006.20
ICICI Bank6.505.856.006.20
IDFC First Bank7.006.257.007.00
IndusInd Bank7.507.007.507.50
Karnataka Bank6.205.906.056.05
Kotak Mahindra Bank6.406.256.406.40
Nainital Bank6.106.056.106.10
RBL Bank7.507.007.057.05
SBM Bank7.106.506.356.35
Yes Bank7.506.757.507.50
AU Small Finance Bank7.405.857.407.40
Capital Small Finance Bank7.106.706.706.70
Equitas Small Finance Bank7.507.107.406.50
ESAF Small Finance Bank7.106.006.255.75
Fincare Small Finance Bank7.506.757.007.50
Jana Small Finance Bank8.157.808.058.05
North East Small Finance Bank7.505.507.507.00
Shivalik Small Finance Bank7.507.006.006.00
Suryoday Small Finance Bank7.997.007.507.25
Ujjivan Small Finance Bank8.257.757.257.95
Utkarsh Small Finance Bank8.257.908.258.25
  • What is the interest rate offered by the Post Office FD fro Senior Citizens?

  • Is the interest earned on senior citizens' fixed deposit tax-free?

  • Can a senior citizen and a non-senior citizen create a combined fixed deposit account?

  • Who is eligible to open a senior citizen fixed deposit account?

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Disclaimer: This is not an investment advisory. The article above is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. The performance and returns of any investment portfolio can neither be predicted nor guaranteed.