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Fixed deposits for senior citizens

Old age often comes with physical, mental and financial concerns for the elderly. So, they require safe and reliable investment instruments. Fixed deposits are often the preferred mode of investment by senior citizens as the principal investment amount is considered safer vis-à-vis investment in equity. For senior citizens, fixed deposits also provide assured returns in the form of interest. Financial organisations, including banks and companies offer fixed deposit policies to senior citizens with a higher rate of interest.

What are fixed deposits for senior citizens?

Fixed deposits are the schemes with dual benefits of being safe modes of investment, besides providing additional income to people, especially senior citizens, through high fixed deposit interest rates. The principal amount here is locked into a tenure ranging from one year to 10 years with annual interest rates of up to 8.95%. For example, on Finserv MARKETS, senior citizens can avail of Bajaj Finance Fixed Deposits, with the benefit of attractive interest rates. Here, senior citizens can invest in tenures ranging from 12 months to 60 months.

Benefits of fixed deposits for senior citizens

Senior citizens are generally provided a higher interest rate as compared to the general citizens. The high interest returns allows them to meet a variety of their requirements. Senior citizens have the option of cumulative and non-cumulative pay outs. Cumulative payouts means that the interest rate is provided at the time of maturity, while in the case of non-cumulative payouts, interest amount can be availed at regular intervals. Non-cumulative payouts have the options of monthly, quarterly, half-yearly or annual basis to help senior citizens manage their finances.

Tax benefits on fixed deposits for senior citizens

In 2018, the union government provided for Section 80 TTB in the Income Tax Act for senior citizens. According to the provision, any taxpayer who is a resident senior citizen, aged 60 years and above at any time during a financial year, can claim Rs 50,000 as a deduction from the gross total income for the particular year of assessment. The income has to accrue from interest on bank deposits, including both savings and fixed, along with interest on deposits in a banking co-operative society and interest on post office deposits. Thus, with the insertion of this new clause in the Income Tax Act, senior citizens can claim a deduction of up to Rs 50,000 in their income earned from fixed deposits. A senior citizen has to submit Form 15H, a self-declaration form, at the time of receiving the interest amount from the financial institution, or at the time of filing annual return, to claim the tax-benefit under this provision of the Income Tax Act.

How to open a fixed deposit account for a senior citizen?

Generally, senior citizens can open a fixed deposit account in the bank where they have savings account. But, a fixed deposit can also be opened with any financial institution by proving KYC details. Proof of age has also to be provided as per the relevant rules. A senior citizen has to submit latest colour photographs along with documents pertaining to proof of identity and address proof. The proof of identity documents includes Aadhar card, PAN card, driving license, voter ID card or any government issued ID card. As proof of address, a senior citizen can submit a passport, electricity bill or fixed line telephone bill. Financial institutions also ask to provide for a bank statement along with a cancelled cheque.

How can a senior citizen instantly calculate the amount of interest on a fixed deposit?

A senior citizen can instantly calculate the amount of interest on a fixed deposit investment through online fixed deposit calculators. These are convenient and an easy-to-use online tool that help a senior citizen calculate the interest amount on the deposit. As a senior citizen, you have to provide three components, the amount to be deposited, the deposit term and the interest rate being offered to compute the interest earned. You can also calculate the interest amount along with maturity amount with a compounding rate of interest using a separate calculator, known as fixed deposit compound interest calculator. Now you can determine the exact value of your fixed deposits on Finserv MARKETS by using the Bajaj Finance Fixed Deposit interest calculator.

What is the maximum and minimum amount for investment by a senior citizen in a fixed deposit?

The minimum amount of fixed deposit varies from one financial institution to another. But, there is no cap on the maximum amount that can be invested in fixed deposits. For instance, on Finserv MARKETS, a senior citizen can start investing in the Fixed Deposit with only Rs 25,000. This fixed deposits not only provides higher returns, but can also enable the options of flexible tenors and multiple payouts.

Can a senior citizen avail of a loan against fixed deposit?

As a senior citizen, you can avail of hassle-free loans through your fixed deposit investment. A loan against any fixed deposit is easy to secure as the fixed deposit is used as collateral for the loan. The maximum amount of loan is generally a certain percentage of the principal deposit. This varies across financial institutions. For example, on Finserv MARKETS, you can avail of a loan up to 60% of the amount invested in non-cumulative fixed deposits and 75% of the amount invested in cumulative deposits.

Can a senior citizen make premature withdrawal of the fixed deposit amount?

Fixed deposits provide the facility of premature withdrawal or closure of a fixed deposit before maturity. In such cases, the duration of the deposit amount will be considered for the purpose of calculating interest payout. You must also remember that banks and companies will levy a penalty for premature withdrawal. The amount of the penalty varies across financial institutions. But a senior citizen can always avail the facility of securing a loan against the fixed deposit instead of breaking their fixed deposits.

Will change of interest rate affect existing fixed deposits of a senior citizen?

If a bank or company announces changes in their fixed deposit interest rates, it will not affect the rate of interest of the fixed deposits of existing senior citizens. This is because the money remains locked-in for the tenure of the deposit as per the terms agreed upon. New interest rates will be applicable only for new deposits.

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