Any individual who has completed 60 years is termed a senior citizen in India. Usually, senior citizens have a low-risk appetite and prefer safe investment avenues such as fixed deposit schemes. So, they’re considered to be low-risk investors. Multiple banks and financial institutions offer additional interest rates to senior citizens; it is mostly 0.5%-0.75% higher than the usual interest rates offered to senior citizens.
Let’s explore more details about senior citizen FD rates.
What is a Senior Citizen FD?
Senior citizen FD schemes are offered by most banks exclusively for senior citizens. These investment schemes offer senior citizens the privilege to earn higher interest rates than regular investors who are not yet 60 years old.
Best Senior Citizen FD Interest Rates 2023
Highlighted below are some of the best interest rates offered to senior citizens by leading banks and financial institutions:
|Bank Name||Highest Interest Rate Slab (p.a)|
|Bank of Baroda||7.75%|
|Bank of India||7.75%|
|Bank of Maharashtra||7.50%|
|Central Bank of India||7.65%|
|Indian Overseas Bank||7.75%|
|Punjab National Bank||7.75%|
|Punjab & Sind Bank||7.90%|
|State Bank of India||7.60%|
|Union Bank of India||7.50%|
Features of Senior Citizen FD
Some notable features of senior citizen FD schemes are as follows:
- Higher Interest Rates: Senior citizen FD rates are usually 0.50% to 0.75% higher than regular FD interest rates.
- Choice of Convenient Tenure: The tenure of these FD schemes ranges from 7 days to 20 years.
- Assured Returns: Investors will receive guaranteed returns irrespective of market movements and inflation.
- Online Account Opening: Senior citizens can open their FDs from the comfort of their homes through an online net banking facility.
- High Upper Limit of Deposit: The maximum limit of these fixed deposit schemes can exceed ₹1 crore. However, this upper limit will vary from one bank to another.
- More Facilities: Investors can avail of loan, nomination, sweep-in and premature withdrawal facilities with respect to these schemes.
Benefits of Investing in a Senior Citizen FD
Check the benefits of investing in a senior citizen FD:
1. Monthly Income
Senior citizens can opt for monthly payment of interest amount. It would help them get a monthly income, which, in turn, would help them plan out their finances during retirement.
2. Maximum Security
A fixed deposit scheme provides maximum security as it’s immune to market movements. Investors remain well aware of what their returns would be. It helps them lead stress-free lives.
3. Interest Benefits
An important benefit is that senior citizens can choose the interest pay-out option they’re comfortable with. If they want quarterly payment of FD interest, it can be arranged.
The fact that FD schemes are low-risk is its most significant benefit. Senior citizens are generally risk-averse, and fixed deposits are a good investment option for them.
Documents Required to Invest in a Senior Citizen FD
While the documents required to invest in a fixed deposit scheme vary from one bank to another, there are certain documents that investors can keep ready.
Take a look at the general list of documents:
- Senior citizen ID card
- Voter ID card
- Driving Licence
- Photo ration card
- PAN card
- Telephone bill
- Electricity bill
- Bank statement with cheque
- Certificate/ID card issued by post office
Eligibility Criteria for Senior Citizen FD
The eligibility criteria for opening senior citizen FD are as follows:
- The applicant must be a resident of India
- The applicant must be 60 years of age or above
- NRI senior citizens can open senior citizen FDs through NRO accounts
How to Choose the Best Senior Citizen Fixed Deposit?
In this section, we’ll discuss some of the key factors you can take into account to choose the best senior citizen FD:
1. Interest Rates
It’s important to choose a bank offering an attractive interest rate on senior citizen FD schemes. It would ensure a good return. So, it’s advisable to check and compare the schemes and interest rates of multiple banks before choosing one.
2. Deposit Limits of the Bank
Remember that different banks have different requirements for minimum amounts. RBI has mandated that the maximum amount one can invest in a collapsible fixed deposit is ₹2 crore. You should check the maximum deposit limit, which serves as a criterion for banks to understand whether they can extend the facility of fixed deposit or not.
3. Reputation and Safety
It’s advisable to choose well-established banks for opening senior citizen FDs. Check the credit rating of the financial institution as it indicates whether a bank would be able to pay back the investors. A high credit rating reinforces the reliability of a bank.
4. Tenure and Flexibility
Check the deposit tenures offered by various lenders. Choose the one most aligned with your financial goals and requirements. While some investors prefer short tenures to fulfil their liquidity requirements, you might prefer longer tenures. Make sure the FD scheme offers adequate flexibility.
Senior citizens must check whether they can liquidate their investments easily or not. They might need money to meet emergency financial requirements. So, it’s important to evaluate the liquidity terms properly before opening an FD. Don’t forget to check the ease and speed of withdrawals and penalties associated with it.
6. Additional Benefits
Check whether the bank offers any additional benefits or not. Often, banks tend to provide priority service and personalised loan options to senior citizens to enhance their banking experience and build stronger relationships.
Tax Implications on Senior Citizen FD
According to Section 80TTB of the Income Tax Act (ITA), 1961, interest earned on senior citizen FDs is tax-exempt till ₹50,000. In case the amount exceeds ₹50,000, 10% TDS will be applicable to the total amount.
In case senior citizens invest in tax-saving FD schemes, they can claim tax deductions for up to ₹1.5 lakh under Section 80C.
To sum up, the senior citizen FD rates at most banks are higher than regular FD rates. Moreover, banks offer priority services, extra attention and personalised services to senior citizens to facilitate a strong relationship.
Considering that senior citizens have low risk-taking ability, FD schemes are ideal investment options for them because these provide guaranteed returns.