Post-retirement can be a fiscally difficult phase of life. Your working days are over and so is your regular income. As a retiree, you might find it hard to support your lifestyle and healthcare needs in the wake of inflation. That calls for proactive and practical retirement planning.
You’d like to invest in a risk-free, high return option that can beat the inflation and sustain you financially in post-retirement years. All you need is a fixed deposit. Why? Well, let’s discuss.
You have toiled hard for your money and would like to see it grow safely. FD is the safest investment option you could lay your hands on. Unlike market-linked schemes, FD is immune to market fluctuations. You receive the guaranteed maturity amount, regardless of how the market performs. The financial institution contractually guarantees your investment. In case of a default, you get INR 1 lakh for each, principal and interest. The RBI monitors FD to hedge you against losses. No other financial instrument in the 80C basket offers such a level of security.
Higher interest rates
You have given your best years to the society and nation. The banks and NBFCs acknowledge your contributions with higher interest rates than general customers. Specifications may vary, but a senior citizen FD usually fetches you .50% higher FD interest rates than the general FD. The FD allows you to opt for interest payouts monthly, quarterly biannually or annually (non-cumulative) to meet your day to day expenses or at the time of maturity (cumulative).
In an FD, the facility of premature withdrawals is there, but with a penalty. The financial institution deducts a certain amount from your proceeds if you withdraw before the tenor expiry. The quantum of penalty differs from bank to bank. However, nowadays many financial institutions offer premature withdrawal option without levying penalties for the same. It’s thus recommended to check the rules regarding premature withdrawal before investing.
Alongside assured returns and higher FD interest rates, tax benefits also come by for senior citizen. The FD interest income up to INR 50,000 is exempted from tax, thanks to the Section 80TTB of the Income Tax Act. You can claim deductions of maximum INR 50,000 on your total tax outgo. Plus, the interest payments worth INR 50,000 attract zero TDS in a financial year. To avail TDS free interest earnings, just submit the Form-15H to the financial institution.
The FD keeps you covered, should you need to fund any urgent requirement, say a life-saving medical procedure. You can pledge the FD as collateral and obtain a low-interest loan, easily and quickly. The loan amount depends on the principal deposit and the financial institution.
The fixed deposit offers you the flexibility to have a nominee to legally inherit the FD proceeds once you exit the stage. You’ll be required to fill Form DA1 to designate an heir at the time of opening an FD account. The decision to nominate can save bad blood among your potential heirs.
Smriti Jain is the owner and senior content publisher at Financesmarti. Financesmarti is a website where she shares a lot of useful stuff for the people and business of India. This includes small business ideas and other banking information, as well. Smriti completed her education in science & technology from Delhi University. Smriti usually has interests in digital marketing now, and she has chosen this career for the full-time opportunity. The primary purpose of starting this blog to provide quality information on the banking industry to the people.