We've often heard our elders say, "Make a fixed deposit (FD), don't spend on stupid things if you have the money." But why do they say this? Well, their wisdom comes from understanding the value of security and predictability, especially during retirement. Fixed deposits offer these very advantages, making them an ideal financial instrument for senior citizens in India.
What are Fixed Deposits (FDs)?
An FD is a financial product offered by banks and non-banking financial institutions allowing you to invest a lump sum for a fixed period, ranging from a few days to ten years. In return, the bank/ NBFC guarantees you a fixed interest rate on your investment. This means you will know exactly how much you will earn at the end of the term, with or without the changing market conditions. If you wish to know more, reach out to a fixed deposit company in Cochin.
Types of Fixed Deposits
Regular Fixed Deposits: These are the most common type of FDs, offering a fixed interest rate for a chosen tenure.
Tax-Saving Fixed Deposits (Tax Saver FDs): These Fixed Deposits offer tax benefits under Section 80C of the Income Tax Act, 1961, but they come with a longer lock-in period than regular FDs.
Senior Citizen Fixed Deposits (SC FDs): These Fixed Deposits offer higher interest rates to individuals aged 60 years and above to provide them with a stable and secure income source during their retirement years.
Features of Fixed Deposits
Guaranteed returns: Unlike the stock market, fixed deposits offer guaranteed returns at the chosen interest rate.
Safety and security: FDs are considered a safe investment option as they are insured up to a certain limit by the Deposit Insurance and Credit Guarantee Corporation (DICGC) in India.
Flexibility: FDs offer various tenure options, allowing you to choose a period that aligns with your financial goals. Additionally, some FDs offer the option to receive interest payouts regularly, which can help manage monthly expenses.
Liquidity: While technically a fixed-term investment, most FDs offer the option of premature withdrawal, although it comes with a penalty. This can be beneficial in case of emergencies.
Benefits of Fixed Deposits for Senior Citizens in India
Higher interest rates: Senior citizen FDs offer higher rates than regular FDs. This means to get better returns on your investment, which can significantly contribute to your retirement income.
Regular income flow: You can choose to receive interest payouts monthly, quarterly, or annually. This regular income flow helps manage monthly expenses and maintain a comfortable lifestyle after retirement.
Tax benefits: While the interest earned on regular FDs is taxable, the interest income on up to Rs. 50,000 earned on Senior Citizen FDs is exempt from tax under Section 80 TTB of the Income Tax Act, 1961. This can help minimize your tax burden.
Low risk: Compared to other investment options like stocks or mutual funds, FDs carry relatively low risk. This is crucial for senior citizens who may not have the same risk tolerance as younger investors.
Easy to understand and manage: FDs are a simple investment option. You don't need to be a financial expert to understand how they work, making them perfect for individuals new to investing or who prefer a less complex financial product.
Conclusion
Fixed deposits (FDs) offer a strong foundation for senior citizens in India, helping them build a secure financial future for their retirement years. They provide three key benefits including safety, income and tax advantages.
If you wish to invest but are unable to do it on your own, reach out to experts like Thirukochi Financial Services, the best company for fixed deposit in Kochi, committed to helping you make informed financial decisions, guiding you through the various investment options, including fixed deposits, and helping you choose the one that best suits your individual needs and financial goals.