look news india
If you are retired or have an elderly member in your house, then this news is going to bring a smile on your face. In today’s time, the stock market and mutual funds may make big promises of returns, but it is not everyone’s cup of tea to invest their life’s hard-earned money in the ups and downs of the market. Especially the senior citizens of our country always look for an investment option where the principal amount is completely safe and along with it they get a fixed, guaranteed return every month or on maturity. Keeping this need in mind, many leading commercial and small finance banks of the country are offering annual interest of up to 8.50 percent on special tenure fixed deposits or FDs to senior citizens.
If you fix a lump sum of ₹5,00,000 at a rate of 8.50 per cent for a tenure of 3 years, the returns you get on maturity after three years will be much better than your expectations. For people planning to park their savings in the right place after retirement, this opportunity is no less than a lottery.
The first question that arises in the minds of investors is that if they deposit Rs 5 lakh, how much money will they actually have in their hands after three years. The interest received on bank fixed deposits is usually decided on a quarterly basis i.e. quarterly compounding. When interest is compounded, the size of the returns becomes increasingly large.
According to calculations:
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Total principal amount invested: ₹5,00,000 (Rupees five lakh)
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Interest rate applicable per annum: 8.50% (Senior Citizen Special Rate)
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Total investment period: 3 years (36 months)
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Compounding Frequency: Quarterly Compounding
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Total interest earned in 3 years: Around ₹1,43,000 to ₹1,43,500
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Total amount received on maturity: Approximately ₹ 6,43,500
This simply means that without any market risk and sitting at home, you will earn a net interest profit of more than Rs 1.43 lakh in just three years. If you opt for quarterly or monthly payouts, the amount will act like a regular pension every month to defray household expenses or medical bills.
Under the banking system in India, senior citizens are given additional interest ranging from 0.50% to 0.75% compared to ordinary citizens. Currently, major government banks like State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda and big private banks like HDFC Bank or ICICI Bank are offering interest ranging from 7.25% to 7.75% to senior citizens on 3 year FD.
On the other hand, small finance banks like Suryoday Small Finance Bank, Unity Small Finance Bank, Utkarsh Small Finance Bank and Equitas Small Finance Bank are offering interest rates ranging from 8.25% to 8.50% or even higher to senior citizens. Many investors get nervous wondering whether their money is safe in these small finance banks. It is important to understand here that like all scheduled banks, small finance banks also come under the purview of Deposit Insurance and Credit Guarantee Corporation (DICGC) under the rules of Reserve Bank of India (RBI). This means that both the principal amount and interest up to ₹5 lakh per account holder in each bank have a 100% government guarantee.
Before investing money in FD, senior citizens must have complete knowledge of income tax rules so that they do not face any kind of shock at the time of maturity. Under Section 80TTB of the Income Tax Act, senior citizens aged 60 years and above get a rebate of up to ₹50,000 on interest received from banks or post offices during a financial year.
If your total interest in the entire year is less than ₹50,000, banks do not deduct your TDS. However, if the interest income crosses this ₹50,000 limit, the bank deducts TDS at the rate of 10%. The easiest way to avoid this is that if your total annual income falls within the basic limit of tax exemption, then you go to the bank branch at the beginning of the financial year and submit ‘Form 15H’. After submitting Form 15H, the bank will not deduct any TDS on your interest income and you will get the full return without any deduction.
Be it Lucknow, the capital of Uttar Pradesh or big and small cities like Delhi, Patna, Jaipur or Mumbai, bank branches everywhere have special desks for senior citizens. If you know how to use net banking or mobile banking, you can book your FD in just two minutes sitting at home. For this, you just have to go to your bank app and select the FD section, select the tenure of 3 years and choose the interest payout option.
If you are not comfortable with digital methods, you can open this FD account by visiting your nearest bank branch and filling a simple form with Aadhar Card, PAN Card and two passport size photographs of yours. Keep in mind that while booking an FD, never forget to enter the name of the nominee, so that in future, in any unexpected situation, your family does not have to face any legal trouble in withdrawing the money.