Fixed Deposits for Senior Citizens – Interest Rates, Minimum Deposit Amount & More
Last Updated : July 21, 2020, 3:05 p.m.
For senior citizens, fixed deposit (FD) is one of the most preferred financial instruments to invest their money. The fixed income that they are going to get from a fixed deposit ensures financial tranquility for them. To invest in an FD, they can prefer to invest a large amount because the principal investment is safe unlike any equity investments and offers an assured return. If you are drawing a pension from the bank, it’s easy for you to open an FD as you are one of the existing customers of the bank. You won’t need to submit documents as the bank will have with it. However, if you want to open an FD of more than INR 50,000, the bank will ask for PAN if not provided by the time you had opened a pension account or started availing any other services.
FD Interest Rates for Senior Citizens
Senior citizens can get a higher interest rate compared to individuals aged below 60 years. Generally, banks offer a 0.50% higher interest rate to senior citizens. They can choose whether they wish to receive regular interest payouts to meet their expenses or get interest proceeds at the time of maturity along with the invested principal amount. Banks typically offer FDs that pay interest monthly, quarterly, half-yearly, or on an annual basis. Check out the table and know the fixed deposit interest rates for senior citizens across top banks in India.
| Banks | FD Interest Rates for Senior Citizens |
|---|---|
| State Bank of India (SBI) | 3.40%-6.20% |
| HDFC Bank | 3.00%-6.25% |
| ICICI Bank | 2.50%-4.60% |
| Kotak Mahindra Bank | 2.75%-5.25% |
| YES BANK | 5.50%-7.75% |
| Standard Chartered Bank | 3.00%-6.20% |
| IDFC First Bank | 4.00%-7.25% |
| Bank of Baroda | 3.40%-6.30% |
| Punjab National Bank (PNB) | 3.75%-6.05% |
| Union Bank of India | 3.50%-5.45% |
Minimum Deposit Amount Senior Citizens Need to Make in an FD
The minimum amount required to be invested in an FD varies based on the bank you choose. And you can start an FD deposit with INR 500 with no maximum ceiling as the aim of an FD is to increase your savings. See the table below to know how much you need to invest in an FD scheme.
| Bank | Minimum Investment Amount |
|---|---|
| SBI | INR 1,000 |
| HDFC Bank | INR 5,000 |
| ICICI Bank | INR 10,000 |
| Kotak Mahindra Bank | INR 5,000 |
| YES BANK | INR 10,000 |
| Standard Chartered Bank | INR 10,000 |
| IDFC First Bank | INR 10,000 |
| Bank of Baroda | INR 1,000 |
| Union Bank of India | INR 5,000 |
Tenure
Banks have set a minimum and maximum period for which an FD account can be opened with them. Usually, one can invest in an FD for a minimum of 7 days to a maximum of 10 years. You can choose the tenure within this range according to your needs.
Taxation
According to the newly inserted section 80TTB in the Income Tax Act, interest amounts received up to INR 50,000 on deposits held with banks, co-operative banks or post offices are exempt from tax. This tax exemption works as follows: A senior citizen can claim a deduction of up to INR 50,000 interest income earned from these entities as a deduction from gross total income before the levy of tax.
Premature Withdrawals
You get a premature withdrawal facility on your FD so that you can withdraw funds from your fixed deposit whenever there is an urgent need. However, a penalty can be levied by the bank on the premature withdrawal of FD. The penalty amount will be reduced from your FD proceeds. Nowadays, some banks do not charge a penalty on premature withdrawals for senior citizens.
Nomination Facility
A nomination facility for FDs is also available. While opening an FD, you must mention the nominee clearly and precisely so that your legal heirs do not have to go through difficulties to claim the money. You can add a nominee to your FD, so later your family can claim the deposit amount in case you die before your FD matures. You need to fill up a Form DA1 to add a nominee to your fixed deposit scheme.
FD Renewals
To continue earning interest on your principal deposit after maturity, you can use the renewal service. There are several instructions available to you when you open a fixed deposit account. It helps you decide whether you want to withdraw the entire funds, reinvest the principal or the interest amount when the FD matures. You can choose any of the instructions based on your convenience
How to Open a Fixed Deposit Account?
When you have an existing relationship with the bank, it will be easy for you to open a fixed deposit account. However, if you do not have a savings account or drawing pension from the bank, you will need to complete the Know-Your-Customer (KYC) process. Submit a self-attested copy of your identity (ID) proof from any of these – PAN Card, Aadhar Card, or Voter ID card. For address proofs, you can submit any of these – Aadhaar Card, Voter ID, Passport, Electricity Bill, etc. Do submit the latest passport size colored photographs along with the duly filled KYC form.