Senior citizens enjoy additional benefits in terms of saving schemes and interest earned on them. Interest is levied on the amount of money deposited for a particular time period. The rate of interest varies for different durations and is liable to change from year to year. Most banks provide a higher rate of interest to senior citizens than the rate available to the general public. They usually ask for proof of age before opening up such an account.
Apart from these benefits, senior citizens also enjoy an annual interest rate of 9 per cent on deposits made by them in post offices, as on March 31, 2007. For information about opening a Post Office Account (External website that opens in a new window), contact the nearest branch in your area.
The Reserve Bank of India (External website that opens in a new window) has permitted higher rates of interest on saving schemes of senior citizens. Accordingly, banks have allowed an added interest on fixed deposits for every term as on . Tax is deducted at source for interest on fixed deposits. This makes this form of investment a useful tax free form of income for older people.
Other than higher interest rates on deposits, senior citizens also enjoy exemptions on penalty rates for premature withdrawal of term deposits. Fixed deposits are sometimes withdrawn to tide over emergencies like sudden medical expenses and hospitalization. In this case, senior citizens are either exempted completely or charged a meagre percentage rate of their deposits.
Some banks like UCO Bank (External website that opens in a new window) provide complete exemption to senior citizens for premature withdrawal of term deposits. Other banks like ICICI Bank (External website that opens in a new window) currently charge around 0.5 to 1.5 per cent penalty depending on the amount of deposit, as on March 31, 2007. For information about current interest rates and other details, one may like to visit the local bank in your vicinity.