They choose to put a significant amount of money into bank FDs since the principal investment amount is deemed safer than equity investments, and the former also provides a guaranteed return in the form of interest income.
Higher interest rate for senior citizens
When compared to the regular citizens, senior citizens usually receive higher interest rates. Banks often pay a 0.50 percent higher interest rate. Senior citizens can choose between receiving regular interest payments (non-cumulative option) to cover their needs or receiving the principal amount plus interest at maturity (cumulative option).
Senior citizen FD rates – one year tenure
|Bank Name||1 Year||Qly Compound Return|
|IDFC First Bank||6.50||10666.02|
Senior citizen FD rates for 2 year
|Bank Name||2 Year||Qly Compound Return|
|IDFC First Bank||6.50||11376.39|
Senior citizen FD rate 3 year tenure
|Bank Name||3 Year||Qly Compound Return|
|IDFC First Bank||6.50||12134.08|
Senior citizen FD rate 5 year tenure
|Bank Name||5 Year||Qly Compound Return|
|IDFC First Bank||6.75||13974.99|
Senior citizen taxation
Interest received on deposits kept with banks, co-operative banks, or post offices is virtually tax-exempt under the recently inserted section 80TTB of the Income Tax Act. The following is how the tax exemption works: A senior citizen can claim a deduction from gross total income before tax of up to Rs 50,000 in interest income generated from these organisations.
Furthermore, no TDS will be deducted from interest payments up to Rs 50,000 made in a single financial year. A senior citizen can submit Form-15H to the bank to prevent TDS deduction.
Minimums and maximums investment
The minimum amount necessary to invest in a fixed deposit differs by bank. The greatest amount you can invest in an FD, on the other hand, is unlimited.
Tenure of fixed deposit
Banks have set a minimum and maximum term for which a fixed-income account can be opened. An FD can usually be held for a minimum of 7 days and a maximum of 10 years. Within this range, you have the option of selecting a tenure.
Nominations for FDs
There is also a nomination option for FDs. It is critical to mention the nominee in a clear and accurate manner when making an FD so that your legal heirs do not have to go through any complications in obtaining the funds. When submitting a nomination, a separate form known as Form DA1 must be completed.
Documentation for senior citizen to open FD
Along with the correctly filled KYC form, you will be needed to give a self-attested copy of identification (ID) proof such as a PAN, address proof such as a Voter ID, passport, etc., and recent coloured pictures.
Bank personnel will verify your age using the documentation you provide to be qualified to invest in FDs as a senior citizen. In most cases, the bank adopts the Income Tax Act’s definition of a senior citizen.
Automatic renewal option
Automatic renewals are now available from banks at the time of maturity. This means that if no instructions are given when the account is opened, the FD will be automatically renewed when it reaches its maturity date. The auto-renewal of a fixed-rate deposit is for the same period for which it was originally placed, at the interest rate in effect on the auto-renewal date.
Important FAQs as per HDFC Bank website
1. What documents are required to open a senior citizen Regular Fixed Deposit?
While opening the account, the customer needs to provide proof of age establishing that he/she is a Senior Citizen. To accomplish this, either of the following can be submitted:
- Secondary School Leaving Certificate (10th Class)
- LIC Policy
- Voters Identity Card
- Pension Payment Order
- Birth Certificate issued by the competent authority
- Defence ID Card / Govt ID Card (Provided they have the cardholder’s photo, signature and date of birth)
- PSU Issued ID Cards
- Senior Citizen Cards issued by Indian Airlines / Indian Railways
- PAN Card
2. Can I open a joint account with a non-senior citizen for Regular Fixed Deposit?
You can, as long as the first account holder is a senior citizen.
3. When does the Bank issue a TDS Certificate?
The TDS Certificate, Form 16A, for TDS deducted during a calendar quarter, will be issued in the next month of the respective quarter.