Senior Citizen Fixed Deposit (FD) schemes are tailored investment products designed specifically for individuals aged 60 years and above. These schemes offer a higher rate of interest compared to regular fixed deposits, making them an attractive option for retired and elderly investors seeking steady income and capital preservation.

How the senior citizen FD schemes work

In India, several banks and financial institutions provide these senior citizen FD schemes. The key highlight of these offerings is the enhanced interest rate, which is typically 0.25% to 0.75% higher than the rates available for general fixed deposits. For instance, if a bank offers an interest rate of 6% for a regular FD, senior citizens may enjoy a rate ranging from 6.25% to 6.75% for the same tenure.

These schemes come with the same basic structure as standard fixed deposits. Investors choose a fixed tenure for their deposit, ranging from as short as 7 days to as long as 10 years. The interest earned is either paid out monthly, quarterly, or annually, depending on the investor’s preference. For senior citizens, monthly payouts are often favoured to supplement their regular income.

Benefits of the scheme

One of the key advantages of senior citizen FD schemes is the safety they offer. Deposits are backed by the credit guarantee of the respective financial institutions, ensuring the principal amount remains secure. These schemes also qualify for tax benefits under section 80C of the Income Tax Act, though the interest income earned is taxable. However, senior citizens over 60 years of age benefit from a higher exemption limit on income tax.

Additionally, some banks offer special senior citizen FD schemes with additional perks, such as higher interest rates for longer tenure deposits or special tax exemption benefits. The interest from these FD schemes, however, may be subject to TDS (Tax Deducted at Source), but senior citizens can submit a Form 15H to avoid TDS if their total income is below the taxable threshold.

What are the riders?

Given the low-risk nature of these deposits and their consistent returns, senior citizen FD schemes are considered a popular choice for older investors who prioritise safety and stability over high returns. However, investors should consider their individual financial goals and explore other options, such as senior citizen savings schemes (SCSS), before committing to a fixed deposit.

In conclusion, senior citizen FD schemes offer a secure and predictable investment route for older investors, combining safety, higher returns, and convenience, making them an appealing option for the financially conservative segment of the population.