The primary motive of senior citizens for investing is ensuring a regular stream of income for meeting their expenses after retirement. Since the risk-bearing capacity of senior citizens is quite low or minimal in the retirement years, people tend to look for investments that are highly safe and secure. Bank deposits meet both these criteria, making them an ideal investment option. Let us find out more about them.
Meaning of Fixed Deposits
As the name suggests, Fixed Deposits refer to deposits made for a fixed duration at an agreed rate of interest. Fixed deposits can be made with banks, several financial institutions, and even private companies. The interest on the investment is paid out to you monthly, quarterly, or yearly depending on your choice. You can choose a monthly pay-out tenure to meet your regular expenses but if you wish to save for meeting a bigger expense like medical treatment or prepayment of your home loan, go for the accumulation of the interest earned and its payout on maturity.
The deposited sum is returned to you after the end of the pre-decided tenure along with the accumulated interest earned by you on the deposited amount.
FDs offer:
- Fixed Returns
- Guaranteed Maturity Return irrespective of volatility in the financial markets
- Multiple Options for Interest Payments Depending on Your Needs
- Option to take a loan in times of emergencies (not in the case of tax-saving FDs)
In India, senior citizen FD rates are a bit higher than the rates on normal fixed deposits. Let us find out more about why fixed deposits are a suitable option for senior citizens looking for safe and steady returns.
Low-Risk Options
Safeguarding your wealth is an important consideration when you are no longer able to work. You are relying on your savings and wealth to continue living a comfortable life in your golden years. This is where bank deposits come as an attractive investment option. Their flexible tenures and pay-out options make them highly attractive.
Higher Interest Rates for Senior Citizens
Senior citizens prefer to invest in low-risk options like fixed deposits since they know that their money is safe and can be withdrawn at any point in time. In India, banks and financial institutions offer senior citizens an interest rate that is generally 0.50% higher than the rate on fixed deposits made by younger people. The interest rates on longer-duration fixed deposits are even higher. Many banks offer additional benefits like no penalty on early withdrawal of fixed deposit funds in the case of senior citizens.
Tax Benefits
Senior citizens can also claim income tax deduction up to Rs 1.5 lakh per annum by investing funds in a five-year tax saving FD scheme. As per the old tax regime, the invested amount is to be deducted from gross total income to arrive at the net taxable income. However, no benefit is available if the senior citizen opts for the new tax regime.
- Tax-saving FDs come with a lock-in period of five years and no premature withdrawal or loans against them are allowed.
- These FDs can be held in a single or Joint mode but in the case of the latter, the tax benefits are available only to the first holder.
- The interest earned on the FD is taxable as per the Investor’s total income and applicable tax rules. The TDS or tax deduction at the source can be avoided by the submission of Form 15H. Senior citizens can also claim a deduction of Rs 50,000 on the interest earned from deposits as per Section 80TTB.
