Investing surplus funds in a fixed deposit in India is a better alternative to leaving it idle. It can especially be great for seniors who are on the verge of retiring. The FD can help you earn substantial returns at minimum risk. They are not market-linked instruments and the principal amount and the interest are not altered by volatility. This phenomenon allows money to grow at a steady pace over a set period. FD is one of the safest return-yielding tools with few of the highest rates. For instance, a trusted Indian bank will offer 6.25% per annum on your funds.
Altogether, it can help seniors accumulate enough for rainy days. This includes a sudden huge medical expense or immediate home repair needs. They can also use the fund to cater to daily needs and live a tension-free independent life during the golden years. Achieving other goals like buying an apartment or international goals is made easier. Below are a few ways opening a fixed deposit account for seniors may be a smart financial move.
Higher Interest Rates for Seniors
Collaborate with a bank that offers 0.5% higher senior citizen FD rates. This does not come with any extra charges or compromises on other benefits. It is a safe and secure way to earn better interest without effort. You can now easily opt for a monthly/quarterly interest payout option or quarterly compounding. All the services offered to seniors are in line with RBIs current instructions.
10% TDS Rebate
From 2022 onward, seniors aged 75 and above looking to get exemptions from filing income tax should fill and submit form 12BBA with their respective banks. This is only applicable to people who receive income from pension and fixed deposit schemes. You have to provide details on tax rebate claimed under section 87A that lowers the taxable income below ₹5 lakh exemption, tax deductions to be claimed under section 80C to section 80U and details of total income from pension and fixed deposit.
Zero Penalty on Premature Withdrawal
Liquidity is made possible at any time for senior citizens. An exemption from penalties ensures hassle-free early cash withdrawal without stretching your finances. Banks usually charge anything between 0.5% to 1% of the interest across all maturities from anyone below 60 years of age. You can get the entire amount of a part without any restrictions.
Low-Risk Investment Policy
As discussed earlier, the highs and lows of the stock market will not impact FD. Seniors can enjoy surety of returns on maturity and receive the exact calculated sum assured. It can stabilise its portfolio by keeping the swing in investment returns to the lowest. The lock-in interest rate is pre-set by the lender depending on the chosen tenure and is non-jumping in nature to ensure a predictable income. This is not the case with investments like a mutual fund where the return is not guaranteed. It will solely depend on the performance of the assets across various categories.
In short, a fixed deposit in India is a viable investment choice for seniors. Carefully consider the terms and conditions and check the perks like compounding frequency and payment form before opting for the scheme.