Fix Deposit (FD) is one of the safest financial assets to invest the money. Generally, Senior Citizens plan to invest in Fix Deposits mainly because of two reasons. Firstly, the surplus savings present in their bank accounts don’t yield enough rate of interest, and secondly, the principal amount invested in FD’s remains safe as compared to that inequity. Also, if the right bank FD policy is chosen – subject to tenure, then returns assured are higher than most of the investments.
For Senior Citizens, the interest on fixed depositis 0.50% higher. The minimum tenure for a fixed deposit is 7 days, while 10 years or beyond is the maximum. Banks offer a various rate of interests depending on the tenure and amount preferred by the senior citizen investor.
Recently developed section 80TTB of the Income Tax Act has special provisions for the senior citizens too. Deduction of Rs. 50,000 can be claimed from the income generated by interest on fixed deposits before paying the taxes. Also, after submitting Form-15H to the bank, senior citizens are exempted from deduction of 10% TDS up to the interest of Rs 50,000 in one year.
If we look at the FD interest rates for senior citizens, then all banks offer different interest depending on the period of investment. Therefore, it is essential to know which bank is paying the highest rate of interest amongst the other banks under RBI.
- According to a survey, most of the senior citizens do multiple FDs of a different bank in ascending tenure to avoid TDS and other taxes. In this methodology of investing, it becomes essential for them to choose a bank FD which given maximum interest for tenure less than a year. Lakshmi Vilas Bank offers an interest of 8.25% for 331-365 days and 8.15% for 181-330 days. Whereas, Ratnakar Bank (RBL Bank) yields 8.15% interest for 241-365 days. Both the banks are private sector banks and regulated by RBI.
- Senior citizens have an ideology to invest only for 1-2 years because of the uncertainty of life. Under such a state of mind, again having a fixed deposit in Lakshmi Vilas Bank is profitable. The bank offers 9% interest on fixed deposit for 450 days for the Indian senior citizens. Apart from that, IDFC First Bank and DCB Banks also offers attractive interest of 8.75% and 8.65% for 731 days and 18 months respectively.
- Investors who manage the portfolio of senior citizens often invest in FD’s extending for 2-5 years. DCB Bank and Ratnakar Bank (RBL Bank) are most profitable in this case. DCB Bank gives 8.75% interest for 36 months, while FD done in RBL Bank for 24-36 months offers 8.55% rate of interest.
- Long term investment in fixed deposits up to 10 years doesn’t show an attractive figure of interest. However, the overall quantitative profitability of interest is more than short-term FD investment. A newly established private sector banking company in 2015, Bandhan Bank offers 8.25% rate of interest for 2-7 years. However, if the investment period is up to 120 months, then both Lakshmi Vilas Bank and Ratnakar Bank (RBL Bank) offers 8.10% interest.
- Not many banks offer fixed deposits for a tenure of 20 years. However, Ratnakar Bank (RBL Bank) and IDBI Bank give 7.70% and 6.50% as FD interest rates for senior citizens for up to 20 years.
- Small Finance Banks give 0.75% more interest to senior citizens compared to 0.50% in regular banks. In 2015, RBI licensed ten Small Finance Banks, and these banks offer substantially more interest rates compared to fixed deposits of other banks in the country.
- A senior citizen investing in a fixed deposit of Jana Small Finance Bank for 1 year or less than a year is liable for 9.10% rate of interest.
- Investing in fixed deposits of Utkarsh Small Finance Bank and Fincare Small Finance Bank for 2 years returns 9.50% interest.
- A 3-year fixed deposit investment in Fincare Small Finance Bank yield interest of 9.50%.
- Jana Small Finance Bank gives an interest of 8.60% for 4-5 years.
- A long-term investment in a fixed deposit of Capital Small Finance Bank for over 5 years gives 7.90% rate of interest.