Owing to low investment risk and flexibility to choose different tenures, bank fixed deposits (FDs) are a popular tax-saving tool for senior citizens. Tax-saving FDs for senior citizens ensure capital safety and promise appreciation over the investment period.
At the stage where they have spent most of their precious years diversifying investment, senior citizens prefer to park their money where it is safe and free from unexpected depreciation due to changing market scenario. Out of many options, FDs are a preferred choice of investment for senior citizens as they help them generate regular income. However, the interest rates have been low in the past, but the situation is improving slowly as some banks have recently announced increase in their FD rates.
Often senior citizens enjoy upper hand when it comes to interest rates offerings by the banks. Almost all banks offer higher interest rates on FDs by senior citizens, but tax liability can reduce the overall gain. That is why, it is advisable for senior citizens to go for tax-saving FDs. These FDs become lucrative as they offer tax benefits along with the option for appreciation in the capital value.
Tax-saving FDs allow senior citizens to make an investment to save tax under section 80C of the Income Tax Act, 1961. You can avail a tax exemption of a maximum of Rs.1.5 lakh. But these deposits have a 5-year lock-in period and premature withdrawals and loans against the FD is not permitted, according to BankBazaar.com.
Most banks offer 0.50% hike in interest rates to senior citizens. This is more than the regular tax-saving FD interest rates. Besides, many tax-saving FD schemes offer an option of joint accounts but only the primary account holder can avail tax benefits.
Moreover, TDS is applicable on FD returns as per the investor’s slab rate. Senior citizens can avoid this by submitting Form 15H (Form 15G for non-senior-citizen depositors) to the bank. They 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 some terms and conditions.
Once senior citizens decide to park their money in tax-saving FDs, it is essential to compare the ongoing interest rates. If you are a senior citizen and planning to explore tax-saving FDs, then the table below offers the current interest rates by some prominent banks.
This table also highlights 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 have a complete clarity on all the terms and conditions before taking a final investment decision.
INTEREST ON TAX SAVING FDS (FOR SENIOR CITIZENS)
Data as on respective banks’ website on 25 Jan 2022
Note: Interest rate of all listed (BSE) Public & Pvt Indian Banks considered for data compilation; Banks for which data is not available on their website, are not considered. Table includes only Tax Saving FDs for Senior citizens (excluding super senior citizens) for 5-Year tenure. *Assuming quarterly compounding of interest for all the banks; *int rate as on 21st Jan 2022
Compiled by BankBazaar.com