For senior citizens, FDs are also their first investment choice as they work as a source of regular income for them. However, the low return rate has been a reason of concern.
Tax saver FDs come with a lock-in period of five years. You can avail of the tax deduction for an amount up to Rs 1.5 lakh in a financial year under Section 80C of the Income Tax Act, 1961.
When it comes to safe investment options, fixed deposits remain a popular choice for many investors, especially for senior citizens who prefer capital safety over capital appreciation. For senior citizens, FDs are also their first investment choice as they work as a source of regular income for them. However, the low return rate has been a reason of concern for FD investors. Fixed deposit interest rates have been falling for over a year now with many banks reducing the rates after the Reserve Bank of India’s decision to keep the repo rate unchanged at a low of 4%.
Additionally, returns from FDs are fully taxable as per the investor’s income tax slab rate, which further brings down the actual rate of return. In such a situation, investors, especially senior citizens, can opt for tax saver fixed deposits that not only offer the convenience of fixed deposits but also tax benefits.
Tax saver FDs come with a lock-in period of five years. You can avail of the tax deduction for an amount up to Rs 1.5 lakh in a financial year under Section 80C of the Income Tax Act, 1961. Senior citizens are generally offered 0.5% p.a. more than the regular tax saving FD interest rates. However, it is important to note that premature withdrawals are not allowed because of the lock-in period of five years, according to BankBazaar.
Fixed deposit accounts can be opened by individuals and Hindu Undivided Families (HUFs) in the ‘single’ or ‘joint’ mode of holding. However, in case of a ‘joint’ mode of holding, only the primary holder can claim tax deduction benefits.
Additionally, you must be aware that TDS is applicable on FD returns according to the investor’s slab rate. However, senior citizens can avoid this by submitting Form 15H (Form 15G for non-senior-citizen depositors) to the bank. Senior citizens can also avail additional tax deduction of Rs 50,000 on the interest income from deposits under Section 80TTB of the I-T Act, subject to terms and conditions.
Therefore, if you’re a senior citizen and want to invest in a tax-saving FD, the table below provides the current interest rates being offered by some of the prominent public, private and small finance banks — including SBI, HDFC Bank, ICICI Bank, PNB, and Axis Bank – in the country.
The table also gives the indicative amount for each of the banks offers on an investment of Rs 1.5 lakh for five years assuming quarterly compounding of interest. You should be well-advised to get complete clarity on all the associated terms and conditions before finalizing any investment decision.
Interest Rate on Senior Citizens’ Tax-Saving FDs Currently Being Offered By Leading Banks
Disclaimer: Data as on respective banks’ websites on November 9, 2021. Interest rates of all listed (BSE) public, private and small finance Indian banks have been considered for data compilation. Banks for which data is not readily available on their websites have not been considered. The table includes only tax-saving FDs for senior citizens (excluding super senior citizens) for 5-year tenures, and banks have been listed in descending order as per interest rate within their category. *Assuming quarterly compounding of interest for all the banks.
Data compiled by BankBazaar.com, an online marketplace for loans, credit cards and more.
Wondering where to save, invest, and how to save taxes? Subscribe to Financial Express Money weekly newsletter for all your personal finance queries.