Fixed deposits have become a lucrative investment opportunity now. Majority of senior citizens prefer fixed deposits for their investments in order to ensure the security of their investments along with assured returns. These returns in terms of interest have increased after the implementation of revised policy by Reserve Bank of India in 2018. This is a golden opportunity to grasp for senior citizens to lock-in their investments at a higher interest rate.
Senior citizens can plan their retirement funds and invest according to tax deductions. If they don’t have any home loans, EPF, and life insurance policies, they can make a strategy to avail the benefits of Section 80C for tax saving. RBI has introduced a Section 80TTB relating to grant a deduction up to Rs 50,000 interest deduction to the senior citizen residents. Therefore, investing in fixed deposits has become a more sensible investment decision for senior citizens.
Fixed Deposits are the safest financial tool that provides a higher rate of interest on FD and maximize the wealth of its holder in the long run. Along tenor increases the interest rate which attracts more senior citizens. As they are risk-averse in nature and unable to make a risky investment, they choose the safer one.
Fixed deposit is subject to TDS (Tax Deducted at Source). Many investors take the necessary steps to safeguard their investment by investing in tax saving fixed deposits. In the case of younger citizens, the interest is chargeable, other than a fixed deposit, to tax if the amount exceeds from Rs. 10,000 and liable to pay 10% TDS.
As an Example:
Any investor has invested Rs 3,00,000 at the rate of 10% interest for a period of one year. After the maturity Rs. 30,000 is earned as interest on which he/she is liable to pay 10% TDS. The actual amount earned is Rs 27,000 in case of non-eligibility of rebate under 15G/H.
- In contrast to the fixed deposits, the PPF (Public Provident Find) and EPF (Employee Provident Fund) schemes run out after a certain stipulated time period. PPF matures after completing a period of 15 years and even EPF accumulates until the service lasts.
- SCSS (Senior citizen saving scheme) is also an option for post-retirement. It offers an interest rate of 8.7% p. a., which is lower as compared to fixed deposits.
How can senior citizens benefit from fixed deposit investments?
- Safety and credibility of investments: For senior citizens, the prime motive for any investment is to earn good returns while ensuring the safety of their capital amount. Bajaj Finance FD has been awarded CRISIL’s FAAA (Stable) Rating and ICRA’s MAAA (Stable) Rating. Hence, senior citizens can rest assured of the stability of their investments.
- Flexible tenors: Fixed deposits offer flexible tenors that can help to ladder of investments across varying interest rates. While other instruments such as PPF, NSC, EPF, and SCSS don’t offer that much flexibility.
- Premature withdrawal: Some financiers like Bajaj Finance offer the facility of premature withdrawal of FD without any condition. This can help fulfil immediate cash requirements in case of an emergency. In contrast, SCSS and other avenues provide this facility only after your investments have completed a certain period.
- Loan against fixed deposit: Fixed deposits offer a distinguished facility, i.e. the option to avail a loan against a fixed deposit. You can avail a loan up to 75 % maturity amount with a cumulative Bajaj Finance Fixed Deposit.
- Periodic interest payouts: Fixed deposits offer flexibility in terms of choosing periodic interest payouts. Senior citizens can choose between cumulative and non-cumulative options. In the case of cumulative FDs, your interest is accumulated and added back to the principal amount, thereby offering you an enhanced return on maturity. Non-cumulative FDs offer periodic interest payouts (monthly, quarterly or annually) thereby providing a regular source of earnings to senior citizens.
- High-interest rates for senior citizens: FD interest rates vary with the tenor. The rates for Senior Citizen Fixed Deposit from Bajaj Finance are 0.35% higher than regular FD interest rates and can go up to 9.1%. Furthermore, senior citizens can take benefits of high-interest rates by choosing long tenors. Interest rates for other investments like SCSS, PPF, etc. are decided by the government and do not have any major upswings.
- Tax benefits: TDS on FD can be avoided by setting a maturity time in such a way that splits the interest amount into two financial years. Senior citizens can also claim a tax deduction of Rs. 50,000 on the interest earned from fixed deposits by filing Form 15H (as per newly inserted section 80TTB).