How Advantageous Are Senior Citizen FDs?

Senior Citizen FD, as the name suggests, is a specially designed fixed deposit scheme for the elderly. The investment option provides extra benefits such as higher interest rate and tax benefits.

During the post-retirement phase of life, an individual seeks for highest safety of capital, as well as stable income generation, which senior citizen FD schemes are capable of fulfilling. It allows them to avoid the risky asset class such as mutual funds where returns are not stable, and capital is also at risk.

Thus, senior citizen FDs offer much-needed financial security with little to no risks. The following are the advantages of investing in senior citizen FDs.

Higher Interest Rate

Senior citizen FD schemes also include Government-sponsored Senior Citizen Saving Scheme (SCSS) offering a higher interest rate on deposits. Banks normally offer 0.50% higher interest rate to senior citizens compared to regular fixed deposits across all the tenures.

On the other hand, SCSS is only available to senior citizens and offers an interest rate of 8.6% per annum on deposits. The interest rate is revised every quarter and is usually higher compared to the bank fixed deposits. Therefore, SCSS offers the highest fixed deposit interest rates for senior citizens.

Fixed Deposit Tenure

The tenure of senior citizens FD can start from five years and goes up to ten years, which helps to lock-in the investment for a long duration and generate higher interest income.

The exact tenure varies from bank to bank and post office. Like, SCSS has an initial lock-in period of five years and can be extended once only for three years.

Flexible Interest Payout Terms

Senior citizens FDs have a pretty flexible interest payout terms to suit the varied needs of the elderly. The interest in senior citizen FDs are calculated quarterly and is added to the maturity value or can be credited to the beneficiary account at a regular interval as directed by the depositor.

Whereas, in SCSS, the interest income is calculated each quarter and is credited to the beneficiary account. SCSS doesn’t have the facility of compounding interest on deposits. One can easily calculate fixed deposit interest income or the total value of deposit at maturity using an FD rate calculator.

Extra Tax Benefits

Senior citizens are entitled to some extra tax benefits on the interest income from fixed deposits. Under Section 80TTA of the Income Tax Act, senior citizens can claim a tax exemption of up to Rs. 50,000 on the interest earned from fixed deposits. Under this section, interest earned from the savings bank account is fully exempt from tax, while Section 80TTB allows deduction of up to Rs. 50,000 on the interest income for all kind deposits including banks, post office schemes and co-op banks.

If the total taxable income including the interest income from fixed deposits is under Rs 3. lakhs, then full tax exemption on interest income can be claimed. And, no TDS is deducted on interest income by banks on submission of Form 15H.


Fixed deposits are indeed an excellent option for income generation, as well as capital security, from volatility and risks. Financial managers suggest researching for the highest fixed deposit interest rates for senior citizens to maximize the investment.

Senior citizen FDs allow money to grow at a steady pace and remain unaffected by external factors. The investment options build trust in the seniors as their life saving are used, and they depend on the returns to meet their daily expenses.

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