Senior citizens always preferred saving in fixed deposits (FDs). They usually prefer to park their investments in FDs after retirement to gain returns in terms of regular or monthly income. Compared to doing so in stock markets or mutual funds, investing in FDs is seen better as there are risk-free and fixed returns. In the last year or so, though, declining bank deposit rates have dramatically diminished their monthly income, and it is only because banks have lowered interest rates on fixed deposits through tenures since the Reserve Bank of India's steady repo rate cuts. There are still several banks that offer competitive rates on three-year FDs to senior citizens amid declining interest rates. Not necessarily, considering the rivalry they encounter in attracting deposits, the small private banks appear to top the rate map on fixed deposits.
Senior citizen FD rates on 3-Year FDs
As of now, few small private banks are giving senior citizens interest rates of up to 7.50 per cent on three-year FDs. These three-year FD interest rates are stronger in contrast with those provided by leading banks in the private and public sector. For example, on three-year FDs for senior citizens, Yes Bank provides 7.50 percent whereas 7.25 percent interest is offered by DCB Bank and RBL Bank respectively. Axis Bank and Kotak Mahindra Bank provide 5.9 percent interest and 5.6 percent interest on three-year FDs, respectively. For elderly people, ICICI Bank and HDFC Bank offer 5.65 percent interest on three-year FDs. Compared with major private banks, the interest rates provided by small finance banks are stronger. For senior citizens, AU Small Finance Bank and Ujjivan Small Finance Bank offer 7.25 percent and 6.55 percent interest on three-year FDs, respectively. Canara Bank and Union Bank of India deliver the highest interest rate of 6 per cent for elderly people on their three-year FDs among public sector banks respectively. Whereas Bank of India and State Bank of India provide senior citizens a 5.8 percent interest on their three-year FDs.
3 Year FD Rates For Senior Citizens
|Private Sector Banks||ROI in % p.a.|
|Public Sector Banks||ROI in % p.a.|
|Bank of India||5.80|
|Punjab & Sind Bank||5.75|
Key benefits of senior citizen FD schemes
The following factors outline the aspects of fixed deposit schemes for senior citizens proposed by different banks:
- Generally senior citizen FD schemes ranges from 7 days to 10 years
- In most schemes, additional FD rates typically vary from 0.25 percent to 0.65 percent are provided to them.
- Many banks measure interest on a quarterly basis, but some banks can also provide interest on a monthly, annual or semi-annual basis.
- Generally 5 years FDs count as tax saving, i.e. depositors can seek tax deductions up to Rs 1.5 lakh under Section 80C.
How to open a senior citizen FD scheme?
Depositors have to visit the post office or bank and fill in the required FD form to open a senior citizen fixed deposit account. Either by cheque or demand draft or online they can deposit in their FD accounts. In banks, depositors can also open an FD account. Many banks allow online form submissions where customers can complete and submit their online FD account opening form. The amount of the deposit is generally withheld from the existing savings bank account of the depositor. Senior citizens can also decide if they want interest to be gained on a monthly, quarterly, or annual basis.
TDS applicable on senior citizen FD schemes
In the category of fixed deposits, banks and NBFCs subtract tax from the accumulated interest before being transferred to the savings account of the holder. As interest payouts, TDS is levied, i.e. monthly, quarterly, half-yearly or yearly. For senior citizens, when the interest surpasses Rs. 50,000 in contrast to Rs. 40,000 for regular citizens, tax is withheld at 10 percent on the received interest.