Fixed Deposits are one of the most preferred forms of investment as it’s a safe option that offers guaranteed returns.
Senior citizens have the privilege to earn a slightly higher interest rate than general citizens with Senior Citizen Fixed deposit schemes; all the banks provide this facility to senior citizens. However, the rate of interest also depends on many other factors and tenure is one of the most important parameters, based on which the rate is decided.
In this article
Key Features of Senior Citizen Fixed Deposit Schemes
The features of senior citizen fixed deposit schemes offered by various banks are listed below:-
- Tenure for Senior citizen fixed deposit ranges from 7 days to 10/20 years
- An additional FD rate is applicable in most of the schemes (usually ranging from 0.25% to 0.65%)
- Banks usually calculate interest on quarterly compounding bases, however, some banks may also offer monthly, annual or semi-annual basis
- FD booked for a 5-year period qualifies as tax saving, i.e. investors can claim 80C deductions for up to Rs. 1.5 lakh
- Bulk deposits are also available under these schemes that usually start from Rs. 2 crores. However, bulk deposits may not provide preferential rates
Details about FD for Senior Citizens
Minimum and maximum investment amount
The minimum deposit amount required to be invested in a senior citizen FD varies from bank to bank.
Banks have a defined minimum and maximum period for which an FD account can be opened with them. It usually ranges from 7 days and a maximum of 10 years. You can choose the tenure within this range according to your needs.
According to section 80TTB of the Income Tax Act, Senior citizens are allowed to claim a deduction of up to Rs 50,000 on interest income earned from these entities (cumulative) as a deduction from gross total income before the levy of tax.
- Interest Income from bank savings and fixed deposits
- Interest earned on post office deposits
- Interest earned on deposits that are with a cooperative society that is engaged in the business of banking. This includes a cooperative land mortgage and land development bank.
- Also, no TDS will be deducted from the interest payments made up to Rs 50,000 in one financial year. To avoid the deduction of TDS, a senior citizen can submit Form-15H to the bank.
FDs normally provide the facility of premature withdrawal which can act as an emergency fund. However, banks levy a penalty on premature withdrawal of FD which differs from bank to bank.
However, some banks do not charge a penalty on premature withdrawals nowadays. Furthermore, some banks also offer FDs without a premature withdrawal facility too.
Loan against FD
FD can be used as collateral to obtain a loan. The maximum loan sanctioned depends on the principal amount and is usually a certain percentage of the same. This percentage can again vary across banks.
While opening an FD, it is imperative that you mention the nominee so that those dependent on you don’t face any difficulties while claiming the money. The depositor needs to fill a separate form while giving nomination, known as Form DA1.
Nowadays, banks also offer the facility of automatic renewals at the time of maturity. This means that the FD will be renewed automatically upon maturity if no instructions are mentioned at the time of opening of the account. The tenure will be the same as the existing FD account.
How to Open a Senior Citizen FD account?
Opening an FD account in banks is a very easy process. You can either visit the bank directly or open it through online mode. Most banks nowadays also accept online form submissions where individuals can fill the details and submit their FD account opening form online. The deposit amount is usually debited from the applicant’s preferred savings bank account. Senior citizens can also choose how they wish to receive interest payout. It can be credited monthly, quarterly, or annually.
To open a senior citizen fixed deposit account in a post office, one needs to visit the post office and fill the relevant FD opening form. The next step is to deposit the investment amount either through cheque or demand draft.
Senior Citizen FD Eligibility
Senior citizens who are of or above the age of 60 years are considered eligible by most of the banks.
Also, there are some banks that consider super senior citizens as well. These are the individuals who are above 80 years; these senior citizens are offered with extra fixed deposit interest rates over the rates offered to senior citizens and general citizens.
FD for Senior Citizen – FAQs
Ques. What is the Senior Citizen interest rate offered by post office FD?
Ans. Post Office Fixed Deposit scheme or post office senior citizen savings scheme offers a 7.40% rate of interest with interest payable quarterly.
Ques. How is the taxation done for senior citizens FD?
Ans. If the interest earned in a financial year (1st April to 31st March) exceeds Rs. 50,000, TDS is charged at 10%.
Ques. What are the documents needed to open a Senior Citizen FD account?
Ans. The following list of documents must be produced to successfully book a fixed deposit account in any bank or non-banking financial companies (NBFCs):
- Photo ID proof (Passport and Voter ID Card, etc.)
- Age Proof
- Residence proof (Aadhaar Card, Passport, latest electricity/water bill, etc.)
- PAN Card (or Form 60 if PAN card is not available)
- Form 15H