look news india
After retirement, the first priority of every senior citizen is to ensure 100% security of their deposits and get assured returns on it without any risk. In this era of instability in the stock market and mutual funds, crores of elders in the country still consider bank fixed deposits (FD) as the most reliable instrument. In the current financial year, amidst the monetary policy and liquidity situation of the Reserve Bank, major public and private banks of the country are offering attractive interest of up to 7.50% per annum to senior citizens on short term FD of 1 year. Compared to normal citizens, senior citizens aged 60 years and above are given additional interest of 50 basis points i.e. 0.50% by banks. This simply means that if general customers are getting 7.00% interest on 1 year FD in any bank, then senior citizens will get direct returns at the rate of 7.50% for the same period.
Often people think that lakhs of rupees are required to earn big profits in FD, but the truth is that even on small investments like Rs 10,000, the direct effect of compound interest is visible. In the Indian banking system, interest on fixed deposits is calculated on the basis of quarterly compounding. If a senior citizen deposits ₹10,000 for 1 year at an annual interest rate of 7.50%, the interest earned gets added to the principal amount every three months. In the first three months (Q1), ₹10,000 earns interest of ₹187.50 at 1.875%, taking the total balance to ₹10,187.50. Interest is calculated on this new balance in the second quarter, which adds interest of approximately ₹191.02, bringing the balance to ₹10,378.52. The amount becomes ₹10,573.12 when interest of ₹194.60 is added in the third quarter, and interest of ₹198.25 is added in the fourth and final quarter. In this way, on completion of 1 year maturity, the senior citizen gets a total amount of ₹ 10,771 back. That is, on the principal amount of ₹ 10,000, the total net interest profit is ₹ 771, whereas in the simple interest system this amount would have been only ₹ 750.
To attract senior citizens, all the big banks of the country are offering the highest interest rates on special FD baskets ranging from 1 year to 15 months. Major public sector banks like State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB) and Canara Bank are offering interest rates ranging between 7.30% to 7.50% to senior citizens for a tenure of 1 year. At the same time, leading private sector banks like HDFC Bank, ICICI Bank and Axis Bank are also offering interest ranging from 7.40% to 7.60% on maturity of 1 year to 15 months. If an elderly person wants a little extra return, then RBI approved small finance banks (like Unity, Suryoday, AU Small Finance Bank) are also offering interest ranging from 8.00% to 8.50% to senior citizens on 1 year FD. Under DICGC norms, the principal and interest amount of every depositor up to ₹ 5 lakh in every scheduled bank is fully insured and protected, thereby leaving no doubt about the security of small investments.
The second biggest benefit of investing money in bank FD for senior citizens is on the income tax front. Under Section 80TTB of the Income Tax Act, citizens above 60 years of age get full tax exemption on the total interest earned on deposits (both savings accounts and FDs) in banks and post offices during a financial year up to ₹50,000. This simply means that if an elderly person has made several FDs worth ₹ 10,000 each and the total interest earned in a year is less than ₹ 50,000, then the bank will not deduct any TDS on his FD. For this, the senior citizen only has to submit Form 15H at the beginning of the financial year in the bank branch or through net banking. If the total taxable income is less than the basic exemption limit, then the hassle of TDS is completely eliminated and the entire profit of ₹771 comes directly into the pocket of the account holder.
The process to open this 1-year high-yield fixed deposit is extremely easy and transparent. If the senior citizen already has a savings account in the concerned bank and net banking or mobile banking is active, then they can open an e-FD in just 2 minutes sitting at home. For this, go to the bank’s mobile app and go to ‘Fixed Deposit’ or ‘Term Deposit’ section, select 1 year in the tenure and enter the deposit amount of ₹ 10,000. The system automatically identifies the category of senior citizen based on date of birth and applies the applicable interest rate of 7.5%. Interest payment options can then be chosen—either a lump sum reinvestment option on maturity which will yield ₹10,771, or regular interest payments like a monthly/quarterly pension. Whereas the elderly who are not comfortable with the digital medium can also open this account by visiting their nearest bank branch and submitting a simple FD form, self-attested copy of Aadhar Card and PAN Card.