senior citizen fixed deposit scheme

Make the Most of Higher Interest Rates on Senior Citizen Fixed Deposit Scheme

Senior Citizen Fixed Deposit Scheme, Fixed deposit is one of the most popular investment options in India. Several benefits are associated with it, especially for those unwilling to invest in high-risk financial instruments such as mutual funds and equity securities. As a secured investment option, it is a great investment option because it offers guaranteed returns and a risk-free investment opportunity. Fixed deposits are suitable investments for senior citizens looking for attractive and assured returns along with flexible tenures and pay-out options. 

Still, the most popular type is the senior citizen fixed deposit scheme, a term deposit plan with special interest rates. It is a fact that fixed deposit accounts are very attractive to senior citizens, in addition to their additional rate of interest, which can go up to 0.50% over that of the general public. The common interest pay-out option can help senior citizens get a steady income in their post-retirement years’ thanks to the steady distribution of interest. They can also do that and availing of a loan against the fixed deposit. If you invest in the senior citizen fixed deposit scheme for five or more years, you can save money on tax while earning additional interest.

Listed below are some of the most important things you need to know about the Senior Citizen Fixed Deposit Scheme

Eligibility for Senior Citizen FD Scheme

The minimum requirement for opening a senior citizen fixed deposit in India is that you must be a country resident. These Fixed Deposits are also available to NRI senior citizens through their NRE or NRO accounts. The age of the individual opening the fixed deposit must be at least 60 years old at the time of opening an account. Customers who are over 55 years of age and have taken early retirement may be able to apply for this type of Fixed Deposit if the bank allows it. Depending on the bank, this rule may vary. All rules are subject to specific terms and conditions.

Features of Senior Citizen Fixed Deposit Scheme

The features of senior citizen term deposits remain the same as those of regular term deposits. The following are just a few of these features.

  • Depending on the particular bank, senior citizen fixed deposit schemes are also available with different tenures, ranging from 7 to 10 years, depending on the specific bank.
  • The rate of interest offered under senior citizen fixed deposit schemes are determined by considering the term deposit.
  • This interest is compounded quarterly, and the interest earned can be credited to a bank account or added to the maturity value of the FD at maturity.
  • Once a fixed deposit has been created, it can be prematurely closed by you at any time. There is no way for a premature withdrawal of funds with tax saver FDs, and the withdrawal could be penalized by the bank depending on the bank’s rules.
  • It allows depositors to deposit as much money as they wish under these schemes, ranging from Rs. 1 crore to higher amounts. Each bank will decide these limits individually so that they may vary from one bank to another.
  • It is worth mentioning that some of these deposits can even be tax saver fixed deposits that come with a 5-year lock-in period and offer special interest rates to senior citizens.

FD Benefits for Senior Citizens

An individual above the age of 60 years can avail benefit by opening a fixed deposit with a financial institution. Here are some benefits related to the senior citizen fixed deposit scheme and There are many types of fixed deposit schemes for individuals interested in retirement planning. 

  • Financial institutions can offer special interest rates that tend to be higher, thus resulting in a higher income.
  • The account holder will be able to grow the money in a safe environment at a steady pace for an extended period.
  • Interest earned on the deposits can be converted into monthly incomes, allowing you to spend your retirement years in more peace.
  • A senior citizen’s fixed deposit can also be considered a tax saver deposit, which can be deducted from the tax on the principal amount under section 80C of the Income Tax Act.
  • Senior citizens can choose different interest pay-out options where interest is credited to the depositor’s savings to account frequently – either monthly, quarterly, half-yearly, or yearly.
  • A regular interest pay-out option can be a real boon for retired individuals because it is a regular income source.

Conclusions

Most Non banking financial institution and banks offer best interest rates on long-term deposits to senior citizens as part of their senior citizen fixed deposit scheme. Some financial institution have specific terms and conditions that apply to these interest rates, which vary depending on the bank or NBFC, but the general principle remains the same. The investor has to select a term of the fixed deposit, which is greater than one year, to take advantage of the special interest rate available for senior citizens. Short-term deposits are usually not eligible for special interest rates. Furthermore, the special interest rates will not apply to your account if you have a joint Fixed Deposit account with a senior citizen on the second account holder.

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