Bank FD for senior citizen

POSTED BY Pankaj Vasudeo ON September 7, 2012 12:03 pm COMMENTS (9)

Hi friends

My dad is retired govt servant age 63 years

getting rs. 18060 pension per month

having rs 500000 fixed deposit @ rate of 10%

my mom having rs 600000 FD @ rate of 9.25%

my mom doesnot fill incometax return

now my dad wants to invest additional rs 400000 in FD ( safe side)

now please guide what is more beneficial if my mom goes for FD rate is 9.25% 

if my dad goes rate is 9.75% ( senior citizen)

income tax benefit for my dad is Rs. 250000 ( senior citizen)

my dad doesnot withdraw his pension 

is it advisable to open RD account as he has rs 18060 fixed income

what he is doing is he waits for 1 year and then goes for FD

but i guess RD will gonna give more return but he says what abt incometax

so please guide what is best for him



9 replies on this article “Bank FD for senior citizen”

  1. Pankaj Vasudeo says:

    My daughter is 3 years old
    can he gift that money to her and I do FD in name of her
    is there netype of thing you can suggest

    1. Dear Pankaj, yes your father can gift to your d’ter but in this case the interest income generated on such D’ter named Fds ‘ll become taxable in your name under the clubbing provisions of Section 64.

      So I w’d not recommend to go for this route. As your father is Sr. Citizen, he should invest under his own name to maximize the interest & at the same time, as his income ‘ll remain in 10% tax slab, as well as the scope for tax saving is there till 3.5L Rs. income by investing full 1L Rs. in Tax saver FDs, so he need not to worry.

      Yes he may invest his pension amount on mly basis in bank RDs. Please do note RDs are not liable to TDS but the interest income is again taxable.



  2. Pankaj Vasudeo says:

    Sir Ji
    My dad trust in govt nd safe options you know old mentality
    its diffcult for me to conv him for these funds
    neways i will discuss this with him

    can you guide me regarding Tax saver FD’s
    what are these is tax earned from these are tax free

    1. Dear Pankaj, Tax saver FDs are available in each bank. The interest is taxable but the investment in FDs in the 1st year is eligible for tax benefit u/s 80C.



  3. Pankaj Vasudeo says:

    thank you Ashal Ji
    I will google abt Tax Saver FD’s
    what about RD account for my Dad’s pension
    is it advisable ?

    1. Dear Pankaj, as you told your father is not using that pension amount, my take ‘ll be to go for a SIP in a MIP. Say HDFC MIP Long Term Plan. Your father may keep adding into it till he wants to say 24 months or 36 or 48 or 60 months. Once he thinks, it’s time to start withdraw, he may do so by withdrawing systematically say 0.5% of the fund value on mly basis.



  4. Pankaj Vasudeo says:

    moms 6 Lakh fd is given by her nri brother
    she is housewife

    1. Dear Pankaj, as the FD of mom is from her own capital (gifted amount from her brother), the income generated on this FD ‘ll be in the name of your mother. Keep it separate from your father’s issues.

      For Father, the Yly income ‘ll be from following sources.
      1. Pension = 216000
      2. Existing 5L Rs. FD = 50000
      3. New FD of 4L Rs. @ 9.75% = 39000

      Total Income to your father ‘ll be roughly 3.1L Rs. Which is more than the zero tax limit by some 60K Rs. To save Tax, he may invest a part of FD into Tax saver FDs.

      In case your father invest under your mother’s name, the income from FD ‘ll be clubbed to your father under the clubbing provisions of section 64 of Income Tax Act. Hence investing under mother’s name for your father’s money is not advisable. Even if you proceed with this FD for mother, the interest is also lower than what you father may earn under his own name.

      think over it.



  5. Dear Pankaj, what’s the status of your mother? Is she an income earner or this 6L Rs. amount is merely father’s money invested in her name?



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