Among the various financial instruments, senior citizens prefer to invest in an FD as it offers assured returns with minimum risks. Both banks and finance firms provide a slightly higher FD interest rate to senior citizens than the regular interest rates that are applicable to non-seniors. However, the regular interest rate must be high enough for the additional FD rate to be of much use.
For instance, banks have lowered their FD rates considerably and this affected the senior citizens who relied on FDs as it was their only source of income.
Let’s say that you want to invest Rs. 1000000 in a senior citizen FD for 5 years. Banks and finance companies provide an additional FD rate ranging from 0.25 to 0.50% depending upon the financier you choose for investing your money.
However, the maximum interest rate provided by banks will be around 5% at present, and adding 0.50% to it will increase the bank FD interest rates for senior citizens up to 5.5%. On the other hand, a corporate FD like Bajaj Finance provides an FD interest rate of 6.85% to senior citizens. The returns that you will get from each of these FD schemes are given below:
| FD plan | Principal amount | Interest rate | Tenor | Interest | Maturity amount |
| Bank Senior Citizen FD | Rs. 10,00,000 | 5.5% | 5 years | Rs. 3,14,067 | Rs. 13,14,067 |
| Bajaj Finance Senior Citizen FD | Rs. 10,00,000 | 6.85% | 5 years | Rs. 3,92,748 | Rs. 13,92,748 |
You can see that this difference in FD rates is large enough to make a big difference in the maturity amount. Let’s see how you as a senior citizen can earn substantial returns amidst the regime of lower interest rates:
Saving taxes
The interest earned up to Rs. 50000 can be claimed for a deduction if you invest in a senior citizen FD. Also, TDS will not be deducted for interest earnings up to Rs. 50,000. For that, you will have to fill Form 15H and submit it to your financier.
Premature withdrawals
Premature withdrawals will cost you some of your interest earnings in the form of a penalty. The penalty fee varies from bank to bank. However, some corporate FDs offer a loan against FD.
For instance, Bajaj Finance FD offers up to 75% of the FD value as a loan, and you even don’t have to submit any collateral for securing this loan. This enables you to avoid the penalty charges and keep your FDs intact.
Splitting the deposits
A wise way to balance the difference created by reduced interest rates is to invest in multiple FDs of different tenors. For that, you will need to split your corpus and deposit them in various FD schemes.
This will not only even out the difference in FD rates over a longer period but the multiple maturity dates will also give you a chance of depositing your returns at a higher rate at an opportune time.
The multi-deposit facility of Bajaj Finance lets you invest in several FDs at once with a single cheque. Also, a flexible tenor from 12 to 60 months can be selected for each of your deposits. Its FDs are accredited highly for its stability and safety by credit rating organizations like CRISIL and ICRA. Therefore, you can invest in this FD scheme without any worries.
Moreover, a 0.10% additional FD rate will be offered to non-seniors on opening an FD account with the help of an online FD form. Also, senior citizens get a 0.25% extra FD rate on investing in one of its FD plans.
Use an FD calculator
Most financiers allow you to use an FD calculator to predict your returns before investing. Likewise, the Senior Citizen Savings Scheme Calculator can be used to check the returns of SCSS, and the Post Office Interest Calculatorcan be used to check the returns of post office FD schemes. The FD calculator lets you know if it is worth to invest in a particular FD or not. With the Bajaj Finance FD calculator, you can estimate the returns of both cumulative FD and non-cumulative FD for the same investment amount and tenor at once. The periodic interest payout options of monthly, quarterly, six-monthly, and yearly payouts can help to mitigate your regular expenses.
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