As a primary go-to financial product for most conservative Indians, bank deposits hold a key place of prominence in the money life of a large swathe of investors.
At a time when bank deposit rates barely beat inflation (pre-tax), the elderly have something to feel better about as some banks offer higher interest payouts to super senior citizens.
Many public sector banks (and RBL Bank from the private sector) have come up with special tenor deposits with interest rates exceeding 8 per cent for those aged 80 and above.
These rates are attractive given the general interest offered on various fixed-income schemes.
Specially for the aged
Punjab National Bank, Canara Bank, Indian Bank, Indian Overseas Bank and Union Bank of India are offering deposits with interest rates of 8-8.05 per cent. The tenors range from 400-456 days, which is a little over a year. RBL Bank offers 8.75 per cent interest on 500-day deposits.
All these deposits for super senior citizens aged above 80 years.
As an aside, IDFC Bank offers 8.4 per cent for deposits of 400-500 days tenor for senior citizens aged 60 or above.
These deposits for super senior citizens are for non-callable deposits. Now, non-callable deposits are those that do not offer the option of premature closure.
Children of super senior citizens also can open these deposits in the name of their parents.
The interest rates on offer compare favourably with 1-2-year post office deposits. Though not comparable, the senior citizen savings scheme (SCSS) with five-year tenor offers 8.2 per cent interest.
These super senior citizen deposits offer rates that are better than what most AAA-rated non-banking financial companies offer for 1-2-year tenors.
Super senior citizens can take the cumulate option if they do not require regular cashflows from these deposits. For those needing regular payouts, the non-cumulative option may be better.
Deposits up to ₹5 lakh are covered by the DICGC ( Deposit Insurance and Credit Guarantee Corporation).
Opening accounts
Most of these banks would require you to open a savings account with them in case you wish to invest in their special deposits. Some banks may require in-person presence at the branch to open accounts.
You can open the deposit account either as a singly or jointly with your spouse or family member. In the case of joint accounts, the primary account holder must be above 80 years of age to avail these special rates.
For investing in any super senior citizen deposit, you will need your PAN card. Additionally, you may need proofs of address (passport, gas or electricity bills) and identity (mainly Aadhaar).
If you have exiting accounts with these banks, then operations become simpler. Also, if you operate their mobile apps or avail of their internet banking services, you may be allowed to open these special deposits online.
In recent times, many public sector banks have started allowing opening of accounts online by verifying your PAN-Aadhaar and carrying out video KYC.
You should ensure that the nomination is made to your chosen beneficiary. In case of multiple nominees, the proportion of the amount to be paid must be clearly specified.
Rates higher compared to post office and NBFC deposits of similar tenor
Safe investments with almost no risk
Higher interest available for limited time period
How taxation works
All interest payments from deposits are added to your overall income and taxed at the marginal slab applicable to the investor. Tax is deducted at source on deposit interest by the banks.
In the case of senior citizens, TDS at the rate of 10 per cent is applicable beyond a threshold interest level of ₹50,000.
However, senior citizens who wish to avoid TDS payments because their overall income is below the taxable threshold or slab, can submit form 15H at the beginning of the financial year, to the bank in which you hold the deposit account.
Also, under section 80 TTB of the income tax act, senior citizens are allowed up to₹50,000 interest income (from banks, post offices, cooperative societies and so forth) as deduction from their overall income.