Fixed deposit (FD) is one of the most popular investment options for senior citizens in India. It’s a simple “deposit now, earn later” option, and for senior citizens, it’s an excellent way to earn a steady, secure, and guaranteed income.Interest rates are the most critical factor when choosing a fixed deposit scheme. In India, the government announces the interest rates on various schemes, and the banks follow them. Senior citizens are always on the lookout for higher interest rates on their fixed deposits, and the Post Office provides a viable alternative to banks.
Post Office Interest Rates for Senior Citizens
Senior citizens can avail of a higher interest rate on their fixed deposit schemes offered by the Post Office. The government of India announced the Post Office interest rates for Q1 (April to June 2021) on March 31, 2021. The new rates are as follows:
- 5-year Monthly Income Scheme (MIS): 6.6% per annum
- 5-year National Savings Certificate (NSC): 6.8% per annum
- Senior Citizen Savings Scheme (SCSS): 7.4% per annum
- 10-year National Savings Certificate (NSC): 6.8% per annum
- Public Provident Fund (PPF): 7.1% per annum
- Kisan Vikas Patra (KVP): 6.2% per annum
The interest rates for the Post Office Fixed Deposit Schemes are set for a quarter. These interest rates are fixed by the government and are not subject to changes by the Post Office.
The Variances in Fixed Deposit Interest Rates for Senior Citizens
The interest rates on fixed deposits for senior citizens differ from one bank to another. Most banks offer higher interest rates to senior citizens compared to the rates offered to the general public. The interest rates vary depending on the bank’s policies and the deposit amount.
For example, HDFC Bank offers a 0.50% higher interest rate than the regular deposit rate to senior citizens. The interest rate offered by HDFC Bank on a 1-year fixed deposit for senior citizens is currently 5.50%.
ICICI Bank offers a 0.80% higher interest rate than the regular deposit rate to senior citizens. The interest rate offered by ICICI Bank on a 1-year fixed deposit for senior citizens is currently 5.50%.
Axis Bank offers a 0.65% higher interest rate than the regular deposit rate to senior citizens. The interest rate offered by Axis Bank on a 1-year fixed deposit for senior citizens is currently 5.50%.
Kotak Mahindra Bank offers a 0.50% higher interest rate than the regular deposit rate to senior citizens. The interest rate offered by Kotak Mahindra Bank on a 1-year fixed deposit for senior citizens is currently 5.25%.
While these banks offer a higher interest rate to senior citizens, it’s essential to do some research before choosing a bank to invest in. The rates offered by banks change from time to time, and it’s vital to be aware of the changes to maximize returns.
Taxation on Fixed Deposit Interest Rates for Senior Citizens
Senior citizens are eligible for a special income tax exemption on their interest income earned from fixed deposits. According to the Income Tax Act of India, senior citizens can avail of a tax exemption of up to INR 50,000 on the interest earned from fixed deposits. This exemption applies to all types of fixed deposits, including those offered by banks and the Post Office.
For a senior citizen who has a fixed deposit of INR 5 lakhs, with an interest rate of 7%, the interest earned per annum will be INR 35,000. This interest income is eligible for tax exemption under Section 80TTB of the Income Tax Act.
Disclaimer:
Investors must note that investing in the Indian financial market is subject to market risks, and investors must gauge all the pros and cons of trading in this market before making any investment decisions. Although fixed deposits provide a secure and guaranteed return, there are better alternatives available with higher returns and better tax benefits.
Summary:
Fixed Deposit is one of the popular investment options for senior citizens in India, offering a steady, secure, and guaranteed income. Interest rates are the most critical factor when choosing a fixed deposit scheme.
The Post Office provides a viable alternative to banks for senior citizens. Senior citizens can avail a higher interest rate on their fixed deposit schemes offered by the Post Office. The interest rates on fixed deposits for senior citizens differ from one bank to another, and it’s vital to research before choosing a bank to invest.
Senior citizens are eligible for a special income tax exemption of up to INR 50,000 on the interest earned from fixed deposits. The investor must gauge the pros and cons of trading in the Indian financial market before making any investment decisions.