Fixed deposits for senior citizens: Special schemes and benefits

Fixed Deposits (FDs) have proven their mettle as an investment option by offering the best return without taking too many risks. Therefore, for senior citizens, who prefer stability over a higher return, FDs have emerged as the right investing option. To bank on this sentiment of the individuals on the north side of 60, financial institutions have designed senior citizen FDs.

Now, these are dedicated investment options, but why should you invest in them? Well, let’s check it out.

  Top 7 Reasons to invest in senior citizen FDs

Here are some of the highlighting reasons to invest in FDs tailored for senior citizens -

1.   Assured return

Probably the biggest reason to invest in a senior citizen FD is the guarantee of return that it promises. Unlike other investment options, the capital you invest is secured, and the interest you earn is also guaranteed. Now, as we all know, the interest rate of FDs is not related to market fluctuations, so it remains the same throughout the tenure.

For instance, if you invest at 5% for 5 years, you will receive a return at this same interest rate for 5 years. It will not change even if the market rate goes down. So, you already know what you will earn at maturity.

2.   Higher interest rate

The next advantage of investing in an FD for senior citizens is that it offers a higher interest rate than usual FDs. Typically, the interest rate here is about 0.25% to 0.50% higher than the standard market rate. So, if a bank is offering a fixed deposit at 7% for regular investors, that can go up to 7.5% for senior citizen investors.

The final senior citizen FD rate will depend on the financial institution you are investing with. Moreover, the tenure of the investment will also play a part here. So, if you invest for a longer tenure, you will get a higher interest rate. For instance, you have decided to invest in an FD for 2 years at 7.25%, but extending that tenure to 5 years can rise to 7.5%.

3.   Regular source of income

FDs are also popular for providing a stable and regular source of income, which is well-suited for senior citizens. Since you can go ahead with the non-cumulative interest rate, where you can earn interest on the deposit monthly, quarterly, half-yearly or annually, based on your requirements, you can set the period and secure a regular source of income on your investment.

This is particularly ideal for senior citizens who have retired and looking for a regular source of income.

On the other hand, if you have any other financial goal in mind that you want to fulfil after a particular period, you can opt for the cumulative interest option. Here, the interest you earn gets reinvested in the deposit, increasing your total earning.

4.   Flexibility of investment

One of the most highlighted benefits of an FD is the flexibility it offers in terms of investments. Here, you, as an investor, can choose the tenure of the deposit, which can be as low as 7 days to as high as 10 years. Moreover, some financial institutions also allow you to go beyond 10 years.

Along with that, the minimum deposit amount for senior citizen FDs, in some cases, can be as low as Rs 1,000. The highest threshold can go up to crores, depending on your appetite.

So, you have the liberty to choose your deposit amount and tenure and ensure you are investing as per your requirements.
  

5.   Greater income tax benefit

Investment in FDs also yields income tax benefits. Senior citizens do not need to pay income tax as long as their total interest income from FDs remains below Rs 50,000 a year. This provision offers relief to the senior citizen by lowering their income tax liability.

6.   Liquidity

Easy liquidity is another notable feature of the senior citizen FDs. In any financial emergencies, you can liquidate the deposit and meet that crisis. However, you need to remember that some penalty charges are involved with the premature withdrawal of deposits.

7.   Availability of loans

In case of a financial emergency, you can use the FD as collateral instead of liquidating your investment and losing money. Financial institutions offer loans against FDs, where you can get up to 90% of deposits value as credit. Also, the interest here is comparatively lower than its unsecured counterparts.

The most significant benefit of this facility is that you enjoy the interest on the deposit even when you are servicing a loan against it.

These are highlighting advantages of investing in an FD curated for the senior citizen. But what do you need to do to start investing?

  Eligibility criteria for senior citizen FDs

Here are the eligibility parameters for the senior citizen FDs –

● You must be an Indian citizen

● You must be over the age of 60 or 55 and have retired early

● You are retired defence personnel and over the age of 50

Besides meeting these eligibility parameters, you need to submit the following papers as well –

● PAN card, Aadhaar card, Passport, and other photo identity proof

● Certificate of retirement from the employer and proof of disbursal of retirement benefits if you are less than 60 years or retired early

Once you have all these details ready, you can apply for the fixed deposit online through the official portal of your preferred financial institution.

  Final words

FDs are a great investment option when you factor in their benefits, especially for retirees. Apart from financial security, it also offers regular income, which in this age comes very handy. So, if you plan to invest in a fixed deposit, go through the terms before moving ahead.