Term Deposit, also known as fixed deposit, are the most popular investment tools for Indian investors. Although it does not offer exponentially higher returns like equity or other market-linked tools, FD is still a ubiquitous and preferred investment instrument. It is mainly due to the security of the funds and reasonable interest rates of fixed deposit accounts.
Who can avail of fixed deposit accounts?
Companies, HUFs, individuals, including senior citizens, can open a fixed deposit account with any bank or NBFC. Almost all banks and financial institutions offer a higher rate of interest on FD accounts of senior citizen customers.
Fixed Deposit for Senior Citizen
A fixed deposit (FD) is one of the most common and lucrative financial instruments for senior citizens to invest their money. It is because the principal amount is 100% safe, and it also offers a higher assured return in the form of interest income. Following are some of the significant reasons that make fixed deposits an attractive investment option for senior citizens:
- Easy transactions
Ease of transaction is one of the main reasons for the popularity of fixed deposit among senior citizens. They prefer hassle-free operation, less documentation and fewer visits to the financial institutions. Keeping these preferences of senior citizens in mind, the banks and NBFC have made the process of opening and operating a fixed deposit account straightforward, quick and hassle-free.
- Fixed and assured returns
As fixed deposits are not under the influence of market status and its uncertainties, it offers fixed and guaranteed returns. The return on investment is secured and safe. Any fluctuation in the market does not affect FD interest rates.
- Flexible pay-outs
The rate of interest applicable to an FD is pre-determined. It depends upon the tenure and the type of FD. An investor can select his Interest pay-out mode as per his financial needs. These can be monthly, quarterly, half-yearly, yearly or on the date of maturity. A senior citizen can also choose between the payment instruments, namely, an ECS or cheque.
- Higher rate of interest
It is the most significant advantage which a senior citizen gets by investing in fixed deposits. Banks and financial institutions offer a higher rate of interest to senior citizens FDs. It is generally higher by 0.25 – 0.5%.
- Tax Benefit
As per the recent changes in the Income Tax Act, senior citizens are not liable to pay any tax or TDS on the interest of their FD if the amount is not more than Rs. 50,000 in a year. The bank or financial institution can charge 10% TDS if the interest amount is more than 50,000 per annum. If the PAN detail of the senior citizen is not available with the financial institution, TDS will rise to 20%
Looking at the benefits which fixed deposit accounts offer, it is proving to be a popular and attractive investment option for senior citizens. Online mode of application and monitoring has further simplified the whole process.
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