Should Senior Citizens Invest in Fixed Deposits in 2018?

Fixed deposits are touted as a great investment for senior citizens by most banks and financial institutions. Usually fixed deposits are safer compared to other forms of investment. You know beforehand exactly how much return you will get. Senior citizens are the prime customers for this type of investment because they look for security the most and it also provides them with a fixed income.

Fixed Deposits Still Safe?

With demonetization, financial experts were expecting the banks to drop their interest rates, but it has not happened. In fact, senior citizen fixed deposit interest rates have gone as high as 8.2% in the new year at some financial institutions like Bajaj Finance.

Senior citizen fixed deposits are some of their best-selling products in the FY18-19, especially after some encouraging reforms made in the new budget. Now, with lucrative interest rates as well, they have become some of the best investment options for seniors.

The FY18-19 Budget for Senior Citizens

Mr. Arun Jaitley announced the new budget in the beginning of February. This budget was looked upon favourably from both sides of the aisle. All age groups had something to look forward to in the coming year, but none as much as senior citizens.

Tax Exemptions Ceiling Raised:

Senior citizens have always enjoyed some form of tax break in previous budgets. But, this year the ceiling was raised with a whopping 400%. Where it used to be that interest on fixed deposits could not be taxed up to a sum of INR 10,000. It has now been amended to extend to INR 50,000. Hence, as long as your interest return is under INR 50,000, you will not be taxed on it at all.

The section 80TTA mandated a similar tax exemption on savings account interest up to INR 10,000 previously. Now, the new section 80TTB includes the interest return on FD up to INR 50,000 as well, making them a preferred investment option.

Tax Slabs for Senior Citizens

Senior citizens above the age of 60 and above the age of 80 fall under different categories when it comes to tax slabs. Senior citizens enjoy a tax fee income cap of INR 3 lakhs and a 5% tax from 3-5 lakhs. 

Conclusions Drawn

As is clear here, senior citizens have gained a big tax break in this year’s budget. But, all that money saved needs to be invest back into their future. Senior citizens are the one group of society that is most susceptible to medical issues and having a fixed deposit helps to navigate those. Yes, having a medical insurance helps, but premiums on medical insurances are quite high. Instead, having a fixed deposit can give you access to a large sum of money when needed. Otherwise, fixed deposits help in paying monthly stipend which is more than enough for monthly expenses.

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More than ever before, it is a safe investment option for senior citizens to invest in fixed deposits. Using FD calculators available on websites of financial institutions like Bajaj Finance, you can calculate your monthly return from your available capital.

For example, if you had INR 10,00,000 to put up in a fixed deposit, at 7.95% annual rate. You would be making INR 79,500 in interest. Out of which only INR 29,500 would be taxable under the new regulation 80TTB.

There is more than enough reasons presented here to make fixed deposits a worthwhile investment, especially for senior citizens in the coming year.

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