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Fixed deposits are one of the most popular financial instruments opted for by senior citizens. Read this article to find out the many reasons why they make an attractive investment option.
Time deposits, also known as fixed deposit, are one of the most popular investment options among Indian investors. Unlike market-linked investment instruments that offer exponentially higher returns, investors still feel a certain strong urge to invest in traditional investment instrument i.e. fixed deposit scheme offered by banks and financial institutions. Individuals, HUFs, companies and even senior citizen are seen to be more inclined to invest in this traditional product. Most of the banks and financial institutions offer a higher rate of interest to their senior citizen customers.
Let us understand why investing in fixed deposit is an attractive proposition for senior citizens:
Unlike all market-linked investment tools, fixed deposit is still at the top of its game as its investors are till today certain that this investment tool will offer fairly good returns on the investments. Following are the reasons that make fixed deposits an attractive investment option, especially for senior citizens.
One of the main reasons for the popularity of fixed deposit among senior citizens is the ease of transaction. They do not want the hassle of transaction on a frequent basis and similarly they prefer less documentation. Keeping in mind the above parameters, banks and other financial institutions have made the whole process of opening and investing in a fixed deposit account simple, quick and hassle-free.
Fixed deposit investments offer fixed returns. Unlike market-linked products, where the amount of return is not known, fixed deposit account holders can be certain about the amount of returns they will be earning on their investments.
Fixed deposit earns interest at a pre-determined rate. The investor can avail interest earned on fixed deposit as per their choice. Fixed deposit instrument offers flexibility to the investor to opt the interest pay-out method. Interest pay-outs of fixed deposit can be received on monthly, quarterly, half-yearly, yearly or on the date of maturity. An investor can choose the payment frequency as per his or her financial needs. Similarly, the investor has the flexibility to choose the manner in which the individual would want the interest pay-out i.e. by ECS or Cheque. Thus, investors can claim interest as per their convenience and according to their financial plans.
The biggest advantage offered by banks and financial institutions is a higher rate of interest for investments done by senior citizens. Most of the financial institutions in India offer a minimum of 25 to 50 basis points higher rate of interest in fixed deposit for senior citizen investors.
Earlier, TDS or Tax Deducted at Source was charged by banks and financial institutions on interest received from fixed deposits if the amount was more than Rs. 10,000 in a year. However, due to recent changes in the Income Tax Act, senior citizens are not charged with TDS if the interest earned from the fixed deposit is not more than Rs. 50,000 in a year. But if the interest earned on fixed deposit is more than Rs. 50,000 per year then the bank or financial institution will charge 10% TDS on the entire interest and 20% in case the investor has not provided PAN details. Thus, investing in a fixed deposit has become a very good investment option for senior citizens.
Fixed deposit for a senior citizen can be availed only by senior citizens as they offer a slightly higher rate of interest. For investing in the senior citizen fixed deposit investor is required to submit their proof of age in order to avail the benefits offered to these fixed deposit instruments. Following is the general overview of the eligibility criteria for availing the senior citizen fixed deposit instrument and few best features offered by the instrument.
In case any investor is inclined to invest in senior citizen fixed deposit scheme then he or she will be asked to submit the following documents:
Thus, it is to be noted by every investor that even though fixed deposit is a safe and secure investment tool, it is best to carry an extensive and careful analysis of all the available senior citizen fixed deposit instruments in the market and then invest your money.
Recommended Read: How Does A Fixed Deposit Work?