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After retirement, the first priority of most senior citizens is to keep their savings completely safe and earn regular and fixed income on it. The country’s second largest public sector bank, Punjab National Bank (PNB) has always been a preferred institution for senior citizens who are averse to the volatile risks of stock market and mutual funds. After the recent interest rate review, PNB has offered attractive returns on its fixed deposit schemes. If a senior citizen invests a lump sum amount of Rs 5 lakh in a fixed deposit for a tenure of 5 years in a bank, he is given an additional interest benefit of 50 basis points (0.50%) directly compared to ordinary customers. This additional interest rate, compounded quarterly over a long period of 5 years, creates a huge financial difference of thousands of rupees, thereby enabling the elderly to get bumper returns on maturity.
According to the official interest rates of Punjab National Bank, interest at the rate of 6.10% per annum is given to the general public on FD with a tenure of 5 years (and 1205 days to 5 years). Whereas senior citizens aged 60 years or above are being offered a special interest of 6.60% per annum for the same period. Apart from this, the bank offers more interest ranging from 6.90% to 7.15% for Super Senior Citizens aged 80 years and above. This additional rate available in government banks helps senior citizens in coping with inflation and managing the living expenses smoothly. In banks, the interest on FD is calculated on a quarterly basis and is compounded and added to the principal amount, due to which the actual effective annual yield comes out to be higher than the normal interest rate.
Let us understand this with exact figures as to who will get the profit after 5 years on a lump sum investment of Rs 5 lakh. If a normal citizen (below 60 years of age) makes a 5-year FD of Rs 5 lakh in PNB, then at 6.10% annual interest rate (compounded quarterly), he will get a total interest of approximately Rs 1,76,966 in 5 years, and the total amount on maturity will be Rs 6,76,966. Conversely, when a senior citizen deposits the same Rs 5 lakh for 5 years at 6.60% interest rate, the total interest he receives increases to approximately Rs 1,93,656, and the maturity amount reaches Rs 6,93,656. This simply means that for the same investment of Rs 5 lakh, senior citizens earn a direct additional income of approximately Rs 16,690 compared to ordinary customers. If a super senior citizen invests in the 6.90% or 7.15% slab, this additional profit margin crosses Rs 25,000 to Rs 28,000.
Tax exemption is also a big attraction of this 5 year fixed deposit scheme. If investors open it under PNB Tax Saver Scheme (PNB Tax Saver FD) with a lock-in period of 5 years, they get the benefit of tax deduction up to Rs 1.50 lakh in the financial year under Section 80C of the Income Tax Act. The biggest relief for senior citizens is available under Section 80TTB of Income Tax. According to this rule, citizens above 60 years of age are completely tax-free on interest income from bank FDs and savings accounts up to Rs 50,000 in a financial year. That means banks do not deduct TDS on interest up to Rs 50,000. If the total annual income is less than the taxable limit, TDS deduction can be completely avoided by submitting Form 15H.
PNB gives complete freedom to senior citizens to choose the interest payout as per their need. Senior citizens who want regular income every month for their household expenses or medicines can choose the non-cumulative option, in which the interest money is transferred directly to their savings account on a monthly or quarterly basis. Those who want to create a large lump sum fund after 5 years can take maximum advantage of compounding by choosing the cumulative option. It is very easy to open an account in this scheme. Account holders can create e-FD in a few minutes sitting at home through PNB ONE mobile app or internet banking. Apart from this, this account can also be opened by visiting the nearest PNB branch with Aadhar Card, PAN Card, Age Certificate and 2 passport size photographs. With government protection, legal insurance from DICGC up to Rs 5 lakh and fixed returns, this scheme proves to be a strong foundation for a secure future for senior citizens.