Effectively, on special FD schemes above 5 years of tenure, there will be an additional interest rate of 0.80 per cent or even more.
The additional rate will be available on fresh deposits opened as well as deposits renewed during the scheme period.
Special bank fixed deposit (FD) schemes for senior citizens have been extended till June 30, 2021. While bank fixed deposits for tenures up to 5 years are offering a return of around 5.5 per cent, most senior citizens, especially those whose long-term deposits are coming up for renewals, are in a fix.
Back in May 2020, some banks had introduced special FD plans for senior citizens for the tenure of 5 years and more. On investments made by senior citizens in such schemes, an additional interest rate was applicable in addition to the extra that they were already entitled to. A senior citizen looking to invest for the long term in a bank FD can now do so till June 30, 2021.
The four leading commercial banks — State Bank of India (SBI), Bank of Baroda, ICICI Bank and HDFC Bank — have introduced special fixed deposit schemes for the benefit of senior citizens. While the regular FD schemes offer an additional 0.5 per cent interest to the depositors who are above age 60, the special FD schemes for senior citizens provide an additional rate of interest. The additional rate will be available on fresh deposits opened as well as deposits renewed during the scheme period.
Under the special FD scheme, there is an additional rate of interest over and above the existing rate of 0.50 per cent on deposits by senior citizens. Effectively, on deposits above 5 years, there will be an additional interest rate of 0.80 per cent or more.
Special FD: SBI Vs ICICI Bank Vs HDFC Bank Vs Bank of Baroda
Under SBI ‘Wecare Deposit’ for Senior Citizens, 0.3 per cent is additionally payable on 5 Years and above tenor. The 10-year FD will be offering 6.2 per cent per annum.
ICICI Bank Golden Years FD Rates provides an exclusive additional interest rate of 0.30 per cent per annum on Fixed Deposits above 5 years tenure and up to 10 years.
HDFC Bank‘s Senior Citizen Care FD offers 0.25 per cent on deposits above 5 years tenure and up to 10 years.
In the case of Bank of Baroda special FD schemes for senior citizens, an additional 1 per cent is for deposits that are above 5 years to up to 10 years.
As interest income in FD is fully taxable, one should consider tax liability while investing in them. Also, before locking funds over the long term, ensure you have adequate liquidity to avail of other investment opportunities. In case one wishes to close the FD prematurely, generally, there is a lower rate of interest paid to the depositors. Know it from the bank before booking the FD with any bank. The FDs are suitable for capital preservation and not wealth creation as they hardly are able to beat inflation over the long term.
Senior citizens may also consider other alternate investment options such as Pradhan Mantri Vaya Vandana Yojana (PMVVY), Post office monthly income scheme (PO MIS), Senior Citizen Savings Scheme (SCSS). The senior citizens need to consider their risk profile, liquidity and tax slab before investing in any fixed-income investments.