While many banks and financial institutions provide senior citizen fixed deposits, here’s what you need to know about an FD investment:
A senior citizen FD offers a higher interest rate than a regular FD. The difference between both the fixed deposits can be of up to 0.5% per year. But this benefit is subject to certain conditions. To be eligible for these interest rates a person must have proof of their age. And the FD tenure needs to me more than a year.
Additionally, if the amount is greater than a crore then this interest rate may not be applicable.
It is also possible for a younger individual to secure the benefits of the interest by opening a joint account with a senior citizen. But the account needs to have the latter’s name.
The interest rate is affected by the following factors:
The tenure of the FD.
The amount being deposited.
Whether the interest is paid on a quarterly basis or when the FD matures.
Additionally, it may differ for various banks and financial institutions.
These interest rates are not applicable in the case of NRE or FCNR deposits.
To be eligible for a senior citizen FD you are required to be a citizen of India and must be above 60 years of age.
The FD tenure can be from 1 week to 10 years.
It is possible to declare a nominee for the FD.
The interest for this FD gets compounded every quarter. This can be payable to the investor or added to the maturity amount.
The limit on the FD amount can be one crore or greater. This limit varies for different banks.
Some senior citizen FDs are also offered as tax saver FDs. This comes with a fixed tenure of 5 years.
Interest from the FD is taxable. If interest is more than Rs.10, 000, then a TDS of 10% is applicable. If the income of the senior citizen is more than the limit set for tax exemption, then they have to pay the tax. But if it is less than the limit, then they can fill form 15G/15H or if TDS is deducted they can request that it be refunded.
You may also consider dividing your investments such that the returns do not exceed Rs.10, 000. Additionally, according to the time of opening an FD with respect to the financial year end, the returns should not exceed Rs.10, 000 within that financial year.