A fixed deposit is one of the simplest financial products in the Indian banking system. A fixed deposit is an investment product that gives you a higher interest rate than a savings account, and which you cannot withdraw from before its maturity date.
Fixed deposit is a deposit product offered by banks, in which a bank account holder makes a deposit for a particular length of time and receives a certain rate of interest, the interest rate remaining unchanged over the period of the deposit. The bank pays interest quarterly or half-yearly depending on where you live as these deposits are sometimes offered as tax-free income, as opposed to savings accounts.
People work hard their entire life building a corpus to have a comfortable and secured retirement. Saving money for retirement becomes critical, especially for the working class.
Through monthly recurring deposits, fixed deposits, mutual funds, they ensure they build a corpus for a stress-free life ahead. Senior citizens want to be financially stable in their old age. They need a regular and adequate income to secure a life of comfort without being dependent, asking for financial help.
Hence planning economic well-being right from the start when you have a good time horizon is essential.
Fixed deposit for senior citizens is a type of account opened by senior citizens that offers various benefits. It provides higher interest rate, flexible interest payment schemes and tax incentives to the senior citizen
Senior citizens in India are also allowed in fixed deposits that do not fall under the tax disbursement horizon in india. Any fixed deposit which is held in the name of a senior citizen at the time of maturity benefits from this rule - fixed deposits with banks, canara bank, state bank of india, yes bank, central bank of india are covered by this type of fixed deposits for senior citizens. fixed deposits are offered in many forms varying from 6 months to 10 years and give out great returns every year
Today we highlight the four main benefits a fixed deposit can offer senior citizens and how it can improve their financial well-being.
High-interest rates
Opening a fixed deposit for senior citizens from financial institutions like PNB Housing provides the liberty of enjoying higher interest rates than the general public.
However, this rate of interest may differ across banks and financial institutions. The interest rate for a senior citizen ranges up to 50 basis points higher than what most general investors enjoy. Even a few basis points a fixed deposit interest rate can help build a sizeable corpus once compounding kicks in.
Low-risk Investment
One of the most secure, safe, and low-risk investment plans one can think of is fixed deposits. It is ideal for individuals with low-risk appetites, like senior citizens, who have a limited source of income and cannot risk losing the capital invested.
Opening a fixed deposit for a higher value and a longer maturity can benefit the investor with a higher interest rate. Hence senior citizens can lock in their corpus through senior citizen FD for extended periods, like five years or more. The flexibility to liquidate an FD is an assurance of access to the corpus in time of dire need.
Guaranteed returns
After retirement, the source of income is limited; investing in asset classes that have a lock-in period and are affected by market volatility must be avoided. Hence, a fixed deposit under the senior citizen scheme is viable due to its guaranteed returns. They can choose to avail the interest amount either monthly, quarterly, annually, or post maturity.
Tax-Free Investment
Fixed deposits turn out to be the best tax saver under section 80C of the Income Tax Act. Here senior citizens can lock their amount for five years or even ten years and reduce taxation.
However, one cannot avoid the tax on the interest rate. If you wish to avoid the tax on the interest rate, the applicant must hand over Form 15G or Form 15H for senior citizens, which could be beneficial under certain conditions.
With institutions offering their best FD interest rates for senior citizens, opening an FD has become a regular investment route. The documentation process for senior citizens is also minimal.
Most institutions in India are more than willing to help senior citizens open fixed deposits or assist them in any banking-related online or offline work. Senior citizens must produce identity proof, address proof, PAN card, if any, Adhaar card, and a photograph on the institution's request if they wish to open a fixed deposit.
Conclusion
A fixed deposit is a way to put money into a bank that pays interest. As the name suggests, the interest rate is fixed at the time you take out the fixed deposit. The terms of any fixed deposit determine exactly when you can take your money back, and how much interest you will get paid for leaving your money with them longer.
A Fixed Deposits (FD) is a type of deposit account in a bank where the ownership remains with the borrower only till the money is deposited.
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