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Additional interest rate is applicable only on deposits of 5 years to 10 years and on new fixed deposits or renewed deposits.

Regardless of your current financial situation, you should always consider investing for your retirement as it helps to safeguard your future against inflation and provide for your healthcare. By creating a well-planned and diversified retirement portfolio, you enjoy your retirement days in peace.

While investing in stocks is a great option, it comes with a certain level of risk — one which you might not want to take at the retirement stage. This is where Fixed Deposits enter the picture. The whole point of investing for retirement is to get maximum returns with minimum risk. That is precisely what the Fixed Deposits schemes help accomplish.

Benefits of Fixed Deposits

FDs have several benefits that make them one of the best investment options for building a retirement corpus. Let us take a look at some of them.

Hassle-free investment

FDs are hassle-free and easier to manage as compared to other investment options. Senior citizens do not want to invest in avenues where they will have to intervene regularly. It is why banks, NBFCs, and other financial institutions offer simple and convenient FD schemes for senior citizens.

Guaranteed returns

Unlike the stock market that is vulnerable to fluctuations, FDs offer fixed and guaranteed returns upon maturity. It is quite reassuring for senior citizens who do not want to take a risk with their investment.

Flexibility in terms of interest payout

There are different interest payout modes that you can choose from before you start investing. The interest can be obtained yearly, half-yearly, quarterly, monthly basis, or at the end of the fixed deposit term. You can choose the frequency of payment depending upon your needs. Since most people do not have a regular income source after retirement, FDs can help you generate a consistent alternate income stream.

Interest rates are higher

Most banks offer relatively higher interest rates on Fixed Deposits to senior citizens. A majority of Indian banks offer a minimum of 0.25% to 0.5% higher interest rate to senior citizens as compared to other investors.

Income tax advantage

According to Section 80C of the Income Tax Act, senior citizens can avail of tax deductions on the amount they’ve invested in a Fixed Deposit scheme. The banks deduct TDS (Tax Deducted at Source) on the interest income. A few years ago, the banks and other financial institutions used to deduct TDS if the total income received from an FD within a year was more than Rs. 10,000. However, some recent changes in the act have further benefited the senior citizens. According to the revised act, senior citizens can avoid being charged TDS as long as their annual income from the Fixed Deposits scheme is less than Rs. 50,000. If such income exceeds Rs. 50,000 per year, then TDS is deducted at the rate of 10%. If, however, the investor has not submitted his/her PAN card details, the TDS will be charged at 20%. These new changes have made FDs an even more attractive investment option for senior citizens.

Eligibility criteria

The person investing in a Fixed Deposit scheme as a senior citizen should be at least 60 years of age.

To avail of the benefits that FDs offer to the senior citizens, one would need to submit proof of age.

All these benefits together suggest that FDs are one of the best investment options for creating a retirement corpus.