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Senior Citizen Fixed Deposit: Features, interest rates, benefits – All you need to know

Priyadarshini Maji
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Fixed deposits in India are a popular investment scheme for people of all ages. Bank FDs are a risk-free investment as compared to non-bank FDs because non-bank FDs carry market and credit risk. Bank FDs also offer slightly lower interest rates than those of non-bank FDs.

However, given the secure nature of the scheme, it is an ideal option for senior citizens to park their money to earn interest. There are FDs offered by banks and NBFCs that cater specifically to the needs of senior citizens. The interest rate of bank FDs varies and depends on the deposited amount, tenure of deposit, and type of depositor. Fixed deposits in India can be opened by both an Indian citizen or an NRI.

Additionally, using a fixed deposit interest rate calculator, investors can get to know in advance how the tenure and interest levied will affect them.

Here are some of the features of a senior citizen's FD scheme:

  • The tenure is the same as that of a regular FD – This scheme also offers deposit periods ranging from 7 days to 10 years.
  • Under this scheme, the deposit period decides the interest rates that are offered to the investor.
  • FD interest rates are calculated on a quarterly basis, they can either be added to the maturity value of the fixed deposit or can be credited to the investor’s bank account.
  • Some NBFCs provide higher interest rates to senior citizens, resulting in better returns.
  • The maximum amount that can be deposited under a fixed deposit scheme, generally, depends on the bank or NBFC. However, it can be anywhere from Rs 1 crore upward.
  • FDs which come with a lock-in period of 5 years can also be a tax-saving option for senior citizens. The tax deductions can be claimed under Section 80C of the Income Tax Act.
  • Senior citizens can close their fixed deposit schemes anytime, even prematurely.
  • The interest rate earned on an FD scheme can be turned into monthly incomes – for the retired who is looking for monthly income can opt for this.

Fixed Deposit Interest Rates for Senior Citizens

Most banks and NBFCs offer special interest rates on their FDs to senior citizens. Having said that, some lenders have certain terms and conditions applied to these interest rates, which vary as per the bank or NBFC, but the general principle doesn't change. SBI offers an interest rate of 5-6.6 per cent on its senior citizen FD scheme, ICICI Bank offers 4.5-6.9 per cent, HDFC Bank offers 4-6.9 per cent, and, IDFC offers 4.5-8 per cent for the tenure ranging from 7 days to 10 years.

To avail of the special interest for senior citizens, the investor needs to choose an FD duration, which is more than 1 year, as short-term deposits aren't usually eligible for special interest rates. Also, in the case of a joint Fixed Deposit account, if the second account holder is a senior citizen, the special interest rates will not be applicable.