Many banks are currently offering senior citizens interest rates as high as 9 per cent on fixed deposits (FDs) per annum. It’s a great time for them to put their money in an FD and enjoy the higher interest rates. However, if you want to make full use of your FDs, you need to keep your FD account in order. Here’s how you can take care of your senior citizen FD account.
Declare A Nominee For Your FD Account
According to RBI data, there’s a huge unclaimed corpus lying with the banks, and one of the reasons is the depositor’s untimely demise and absence of a nominee in their account. You may not want your fixed deposit to get marked as ‘unclaimed’ by your bank, so mentioning a nominee in your FDs at the time of investment is important. At the same time, keep a record of all the investments and your FDs in one place and share the same with your intended legal heir or an appropriate close relative/friend.
Submit Form 15H To Your Bank
If your income is below the taxable limit, you must file Form 15H with the bank where you have invested in the FDs to avoid the tax deducted at source (TDS). Form 15H is a self-declaration that your tax liability for the eligible financial year would be Nil, and you are not liable to pay the tax; therefore, instruct the bank not to deduct the tax on your FD interest. You can submit Form 15H when your interest income during the financial year exceeds Rs 50,000, but your total income is below the taxable limit. It can help you avoid going through the process of claiming the TDS refund.
Avoid Breaking FDs Unless It’s A Financial Emergency
Do you know banks charge a penalty if you break FDs prematurely? That’s true, and it can take away a hefty part of your total interest income earned on FDs. So, what to do if you have a temporary financial emergency and a fund requirement for a short term? Most banks allow the overdraft facility against FD accounts. Banks provide around 90 per cent of the FD value as an overdraft limit and levy interest in the range of 0.50 per cent to 2.0 per cent as spread over and above the underlying FD interest rate. For example, if your FD interest rate is 8 per cent per annum, the bank will charge interest of around 8.50 per cent to 10 per cent per annum on your overdraft account. The interest on an overdraft account is calculated daily on the amount withdrawn.
Senior citizen FDs are one of the safest and most reliable corpora for retirees. While investing in the FDs, choose the suitable tenure to use them effectively in sync with your retirement goals.
The author is an independent financial journalist