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Senior Citizen Fixed Deposits (FDs) are the most lucrative investment instruments for individuals over 60 years of age. These term deposit plans are offered by leading banks at special FD interest rates. The FDs are accompanied by benefits like steady returns, loans, and tax savings. Individuals can enjoy their post-retirement years without any stress when investing in a Senior Citizen fixed deposit.

Senior Citizen FD Interest Rates 2021

Bank NameLess than 1 year1 to 5 yearsAbove 5 years
IDFC First Bank3.25% – 5.75%6% – 6.50%6.25%
DCB Bank4.75% – 6.45%6.55% – 7.25%7.25%
Lakshmi Vilas Bank2.50% – 4%5.50% – 6%6%
Yes Bank4% – 6%6.50% – 7.25%7.50%
Jana Small Finance Bank3% – 6.75%7% – 7.25%6.50%
Equitas Small Finance Bank4.10% – 5.90%7% – 6.90%7.15%
Bandhan Bank3.75% – 6%6.50% – 6.25%6.25%
ICICI Bank3% – 4.90%5.40% – 5.85%6.30%
HDFC Bank3% – 5.40%5.40% – 5.80%6.25%

Features of a Senior Citizen FD

Fixed deposits are safe investment options for senior citizens with low or irregular income flow after retirement.

The salient features of senior citizen fixed deposit schemes offered by banks are:

  • The tenure for the Senior Citizen FDs ranges from 7 days to 20 years
  • Senior Citizen FD rates are usually 0.25% to 0.65% higher than regular FD interest rates
  • Banks may offer monthly, annual, or semi-annual interest calculations to senior citizens in place of quarterly compounding.
  • Senior Citizens can invest in tax-saving fixed deposits for 5 years and save taxes They can claim a tax deduction up to Rs. 1.5 lakh under section 80C of the Income Tax Act, 1961
  • Bulk deposits starting at Rs. 2 lakhs are available under some schemes but, they may not be eligible for preferential rates

Benefits of Investing in a Senior Citizen FD

Senior Citizens can invest their lifetime earnings in fixed deposit schemes to avail the following benefits:

  1. Guaranteed returns: Senior Citizens can be assured of the returns on their fixed deposits and do not have to keep track of their wealth until maturity. The FD interest rates are pre-determined and do not change after the investment is made. 
  2. Minimum Risk: Fixed deposits give assured returns at predetermined interest rates. Unlike other market-linked instruments, the risk is low so senior citizens can be relieved after investing.
  3. Ease of opening: Opening a fixed deposit is hassle-free and requires minimum documentation, making it a common reason for senior citizens to opt for it. Nowadays with internet and mobile banking, it’s a matter of just a few clicks and you can open your FD account. Moreover, if the KYC is already completed with the bank then no additional documents are required. 
  4. Flexibility: Senior Citizen FD schemes allow them to claim interest as per their preference and financial needs. Investors can opt for quarterly, annual, bi-annual, or even monthly payout of interest to replace their regular pre-retirement income.
  5. Higher rate of interest: Banks usually offer higher FD rates for senior citizens compared to those of regular investors.
  6. Tax Benefit: The interest earned on a senior citizen fixed deposit is exempt from tax for an amount up to Rs 50,000 under section 80TTB of the Income Tax Act, 1961. If the amount exceeds Rs. 50,000 10% TDS is charged on the total amount. Moreover, if you invest in a tax-saving FD you can claim a deduction up to Rs 1.5 lakhs under section 80C.

How to invest in Senior Citizen FD?

Investors can open FD accounts in a few simple steps in any bank, either through offline mode or online mode.

Process for offline mode

The depositor must visit the nearest bank branch with Proof of Identity, Proof of Address, Age proof document, and Passport size photographs. They will be required to fill an FD account opening request form and furnish the bank account details for depositing money and interest payout.

Process for online mode

 Depositors can log in to their net banking using their login credentials. Select fixed deposit scheme, tenure, interest payout options, maturity instructions, and bank account to be linked. Upon submission of all details, the request will be processed.

How to avoid TDS deduction on senior citizens FD?

TDS is deducted on the fixed deposit interest amount earned by senior citizens if it exceeds the government prescribed limit of Rs. 50,000 per year. This deduction leads to a lower maturity amount than what is specified in the Fixed Deposit Receipt (FDR). The taxpayer can for sure claim a refund against the TDS deducted at the time of filing the income tax return. Senior Citizens can avoid TDS deduction on their FDs by submitting Form 15H if their taxable income is below Rs. 5 lakhs i.e., their tax liability is NIL.

Frequently Asked Questions

Does senior citizen FD have a higher interest rate?

Yes, most banks offer higher interest rates of senior citizen FDs compared to regular fixed deposits. This makes FDs the most preferred investment instrument among senior citizens with low or irregular income streams. It efficiently multiplies their wealth and helps them save taxes.

What age proof is required for a senior citizen fixed deposit?

Usually, banks accept Aadhaar, PAN card, Matriculation Certificate, Birth Certificate, and Senior Citizen ID as age proof documents for opening a senior citizen FD.

Is interest on senior citizens fixed deposit tax-free?

Interest earned on a senior citizen FD is tax-free up to Rs. 50,000 under section 80TTB of the Income Tax Act, 1961. 

Which bank is best for senior citizens?

Yes bank provides the highest interest rates as 7.50% p.a for senior citizen fd account with tenure above 5 years. Investors must assess their financial needs and purpose of investment before picking the best bank for senior citizens fixed deposits. You must consider factors such as interest rate on FD, ease of access, simplicity in the application procedure, etc. They can visit their preferred bank’s website or contact the nearest branch for personalized assistance

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