An individual must plan on managing their finances in their retirement age without any dependency on others and without compromising their standard of living. The corpus of funds accumulated by senior citizens can be invested for good consistent returns through fixed deposits. How can senior citizens can invest in some of the best interest-rate fixed deposits is discussed in this article.
Firstly, it is essential to understand what is a fixed deposit for senior citizens. Banks and institutions in India, offer fixed deposit services with higher interest rates than other deposits for retirees. Moreover, some banks offer an additional interest rate of basis points for higher customer attraction. Apart from government schemes, commercial banks in India offer some of the best FD rates for senior citizens.
Steps to choose the best FD rates for Senior Citizens
Once the importance of what is a fixed deposit is established, here are some steps to follow for adapting the best FD rates for senior citizens.
Type of FD Plan
There are two types of FDs available for senior citizens to choose from. A cumulative fixed deposit allows interest amounts to be credited in the fixed deposit, which the account holder can collect after maturity.
Different from this, a non-cumulative deposit offers a pay-out to another saving account for the interest every quarter, six months or annually depending on the institution’s policy. Senior citizens can choose as per their preference for FD investments.
In old age or retirement, no one wants to face hurdles and repeatedly approach the branch offices for their queries. Institutions that offer digital services can help senior citizens access their account information, date of interest payments, maturity dates, withdrawal penalties, and other charges instantly from the comfort of their homes.
Plan eligibility for a loan
Banks and institutions in India offer secured loans accepting fixed deposits as collateral. Senior citizens who need immediate short-term funds can avail of instant loan facilities with fixed deposits that are eligible for collaterals on other loans. Retirees need to gather such information before initiating the FD account.
Lock-in Period and Pre-mature Withdrawal
Certain fixed deposits are offered, with a pre-decided lock-in period where withdrawal of funds is forbidden. These lock-in periods defer as per institutions. Pre-mature withdrawal is allowed, but penalties and charges depend on the tenure before the withdrawal. To gain the full advantage of the best FD rates for senior citizens, one must not withdraw them earlier than the maturity date.
Ratings & Credibility
Private financial institutions that offer fixed deposit services are audited periodically by third-party rating agencies that ensure transparency for investors and the general public. Even the FD plans get timely ratings from these agencies. In the case of private and government banks, the Deposit Insurance and Credit Guarantee Corporation (DICGC), an RBI subsidiary, ensures an amount of Rs. 5 lakhs for every fixed deposit account.
When the interest amount gets credited to the account for the year, a TDS deduction is liable for interest earnings. As per the RBI, there is no TDS for bank FDs interest amount under Rs. 50,000/- for senior citizens and corporate FDs, it is under Rs. 5,000/-. Moreover, form 15H allows senior citizens to deduct or eliminate their taxable amount since the tax calculated is nil for their total income below Rs. 2.5 lakhs for the year.
During retirement age, FD investments must be kept separately for short and long term needs. The longer tenure FDs must be untouched to earn desirable income earnings, and for the immediate need of funds, short-term FDs might be liquidated. The interest rates are upgraded and degraded as per the RBI base rates. One must keep an eye on and act according to the interest rate updates and budget schemes to ensure high-interest earnings for senior citizens.
The insured security by the DICGC and the TDS exemption on interest rates have attracted many senior citizens to opt for bank fixed deposit schemes. As a traditional investment strategy, they offer no risk unlike the stock market or mutual fund investments. Senior citizens need to make the most of their savings and adopt the best-fixed deposit investments to cope with their future financial needs.