With banks and financial institutions offering higher interest rates on fixed deposits for senior citizens compared to regular FDs, this investment avenue has now become even more attractive for elderly investors and those looking for secured and steady income. However, before parking funds in senior citizen fixed deposits, it is crucial to evaluate several factors.
Senior citizens continue to get higher interest rates compared to other depositors. One of the best investment advantages is that they get the flexibility to choose tenures. Based on their financial needs and requirements, they can invest their money in FDs.
Here is what you must remember while putting your money in FDs as a senior citizen.
1. Higher Interest Rates: Senior citizens typically enjoy 0.25% to 0.75% higher interest rates on FDs compared to regular investors. For instance, leading banks like the State Bank of India (SBI) and HDFC Bank offer rates upwards of 7.5% for senior citizens, making it a lucrative option for risk-averse investors seeking predictable returns.
2. Regular Income: Senior citizen FDs provide the option of periodic interest payouts, which can serve as a reliable source of income post-retirement. This feature is particularly beneficial for those who depend on interest earnings for daily expenses.
3. Tax Implications: While FDs offer stability, the interest earned is taxable under the Income Tax Act. Senior citizens should consider tax-saving FDs or explore options under Section 80TTB, which allows a deduction of up to Rs 50,000 on interest income from FDs.
4. Safety and Liquidity: Bank FDs are considered low-risk investments as they are insured up to Rs 5 lakh per depositor by the Deposit Insurance and Credit Guarantee Corporation (DICGC). However, premature withdrawals may attract penalties, so liquidity needs should be carefully assessed.
5. Inflation and Real Returns: With inflation hovering around 6%, the real returns on FDs may be modest. Senior citizens should balance their portfolios with other inflation-beating instruments like senior citizen savings schemes (SCSS) or mutual funds for long-term growth.
In conclusion, senior citizen FDs are a safe and reliable investment option, but individuals must consider interest rates, tax implications, and inflation to make informed decisions. Diversifying investments can further enhance financial security during retirement.
Senior Citizen Fixed Deposit Interest Rates
| Banks | Interest Rates | Tenure |
| State Bank of India | 7.50% | 2 years to less than 3 years |
| Bank of Baroda | 7.65% | Above 2 Years and upto 3 Years |
| Indian Overseas Bank | 7.80% | 444 Days 444 Days |
| Union Bank of India | 7.55% | 456 days 456 days |
| Bank of India | 7.80% | 400 Days |
| Canara Bank | 7.90% | 3 Years & above to less than 5 Years 3 Years & above to less than 5 Years |
| Indian Bank | 7.80% | 400 Days |
| Punjab National Bank | 7.75% | 400 Days |
| Punjab & Sind Bank | 7.95% | 555 days |
| HDFC Bank | 7.90% | 4 Year 7 Months – 55 months |
| ICICI Bank | 7.85% | 15 Months to < 18 Months 15 Months to < 18 Months |
| Axis Bank | 7.75% | 15 months < 16 months |
| Kotak Mahindra Bank | 7.90% | 390 Days (12 months 25 days) |
| Bank of Maharashtra | 7.95% | 366 Days |
| Yes Bank | 8.50% | 18 Months |
| Ujjivan Small Finance Bank | 8.75% | 12 Months |
| Equitas Small Finance Bank | 9% | 888 Days |
Compiled by Bankbazaar.com