Unlike earlier days, when retirees used to live off their savings and pensions, today, the senior folks too, are as eager as the younger generation to increase their wealth. They are actively seeking out investment options like real estate, gold, SIPs and mutual funds, stocks, and shares. Each of these options has its pros and cons, and need to be looked into thoroughly before any money is invested. However, there is one investment option that has stood the test of times and is availed by many people even today.
This happens to be the Fixed Deposit (FD) option given by all the banks. Banks have traditionally been a safe way of savings for the Indian population. Except in the one odd case of some unauthorized money lending type of banks having taken people for a ride, the authorized banks have always got the trust of the people. Perhaps, this is also why the Indian population responded so well to Prime Minister Narendra Modi’s call to create a bank account (Jan Dhan Account). So, why are FDs still the safest best, for Indian seniors and what benefits do they gain out of it?
Easy to invest
It is easy to invest in an FD, as it can be easily linked to your savings bank account in the bank. Alternately, there is provision for seniors to open just an FD account, even without having a savings account; few banks allow this. The bank will follow due process in terms of getting your signatures on application forms, collecting necessary proofs (age, address, PAN, ID, etc.) and also verifying the same.
Once that is done, the amount that you want to invest can be easily put into an FD account. The minimum amount to be invested in banks often differs from bank to bank. However, there is usually no maximum amount designated for investment into FDs. So, unlike other investment options, you need not read up or inquire too much about it. Yes, the interest % varies based on the period and also from bank to bank. You need to know this, so that you know what amount you will be getting in return and when. But, one thing is rest assured; your money is safe.
Typically, all banks offer a higher rate of interest to senior citizens for the FDs. This differs from 8.50 to 9.25% per annum based on tenure, amount and the bank you choose to invest in. The interest may be paid quarterly, half-yearly or annually. The FD can be made for a minimum period of 7 days to a maximum of 10 years also. You may also choose to liquidate the FD any time you wish. The bank will calculate pro-rata interest and pay you the amount immediately. The only point to note is that few banks charge a pre-mature withdrawal penalty, which will be deducted from the amount paid to you.
Incidentally, the FD can be used to avail a loan from the bank, in case of any emergencies also. The FD becomes the collateral, and you can repay the loan, just like any other. The best part about an FD happens to be the tax exemptions that seniors can avail on this. Senior citizens will be exempt from Income Tax for the FD interests as per the newly inserted section 80TTB in the Income Tax Act. An interest amount of up to Rs 50,000 on deposits held with banks, co-operative banks or post offices are exempted from tax. Moreover, no TDS will be deducted from the interest payments for an amount up to Rs 50,000 in one financial year.
Most banks also offer auto renewal for the FDs, which mean that in case you forget to visit the bank, the FD remains valid, and your interest would have got auto credited into your linked savings account. Also, FD allows you to provide nominees, which means that if something happens to you, your near and dear ones can easily claim the amount.
Hence, FD happens to be one of the best to save, invest and also save tax, for the senior citizens in India. It goes without saying that it has been one of the safest as well, for a long time.