Senior citizens can usually avail an additional interest rate of 0.50 per cent over and above the regular rates offered by most banks on fixed deposits with varying tenures. The interest earned on these deposits is paid to investors at fixed intervals, such as monthly, quarterly, half-yearly or yearly.
Top 5 Senior Citizen Bank FDs:
So which banks have the best fixed deposits for senior citizens? Which banks offer the highest interest rates on bank FDs for senior citizens? We take a look at the top 5 senior citizen bank fixed deposits listed by ET Intelligence Group:
Source: ET Intelligence Group
Unlike the Senior Citizen Savings Scheme and Post Office Monthly Income Scheme, bank FDs offer more flexibility in terms of tenure. Investors can spread their funds across different maturities using the 'ladder technique' instead of locking them in for a fixed period, says an ET report.
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This approach ensures liquidity and helps manage 'reinvestment risk'. As the shortest-term FD matures, it can be reinvested for the longest term, and this process can be repeated with other maturing FDs. It is important to ensure that regular income needs are met and deposits are distributed across different maturities and institutions.
Investing in a five-year tax-saving bank fixed deposit can help save tax, as it qualifies for Section 80C tax benefits. However, this type of deposit comes with a mandatory five-year lock-in period, and premature withdrawals are not allowed. While the interest income is taxable, the tax amount saved in the year of investment compensates for it.