Senior Citizens Tax Saving FD: Rising interest rates have created confidence among senior citizens to go back to their traditional investment strategy and invest their money in fixed deposits. After the RBI Repo Rate Hike , many banks have increased their FD interest rates . Because of which the interest rates of senior citizens have become very high.
As the new year 2023 begins, it is the right time for senior citizens to plan their investments and choose tax saving FDs to make the most of the rising interest rates on deposits. Lending may become more expensive in the coming times and banks may want to entice investors to keep their money with them to increase their cash flows.
Starting a tax-saving FD teaches a very important lesson, that is to save more. Saving a penny is earning money. This is a general rule, and it works well for senior citizens as well. Here are some of the key features of the tax saving senior citizen FD.
- Fixed Returns: Many financial instruments show volatility when it comes to returns. Moreover, investors have to wait for an average of three to five years for their investments to grow. On the other hand, FD gives you fixed returns risk free. There is no risk to your money, and you get assured returns.
- Flexibility in tenure: FD comes with flexibility of tenure and amount. You can choose any tenure and amount you want to invest. However, for tax saving FDs, you must have a lock-in period of at least five years. Longer tenure helps you deposit more amount with interest. Many people opt for longer tenure and higher maturity amount for tax saving.
- Zero Maintenance Cost: Unlike mutual funds and stocks, when you invest your money in FDs you don’t really need to track the market and ups and downs. This is a one time activity, and you can get your maturity once your FD tenure is over. There is no cost to anything. You put a fixed amount in the FD account, and you get a lump sum when your FD matures.
- Liquidity: Despite the lock-in period in case of tax saving senior citizens FD, you can still liquidate your investment if you need funds due to an emergency. The lock-in terms and conditions are not very stringent as compared to other financial instruments. However, you must check with the bank for deductions and penalties when you opt for early withdrawal.
- Safety: Your money remains completely safe in the FD account until your bank defaults. Despite this, you are eligible to claim a maximum of Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) with effect from 4 February 2020. This makes FD a very safe investment option for senior citizens.
- Tax Saving: Tax deduction of up to Rs 1.5 lakh is allowed under Section 80C, when you invest in a tax-saver FD with a minimum lock-in period of five years.
