Are FDs beneficial for senior citizens?

Fixed Deposits are an excellent option especially if you are looking for a safe bid with decent returns. They are easy when it comes to operating; you do not have to constantly monitor it, and assures returns at the same time. The investor has the flexibility of choosing a term of their choice and benefit out of the returns to live a comfortable life. This instrument is safe for senior citizens since it provides high security with considerable returns.

As the interest on Fixed Deposits is taxable, it gets added to the income for senior citizens. If the total income for senior citizen exceeds the tax exemption limit, then the senior citizen is required to pay tax. However, if the income is less than the exemption limit, then the senior citizen, i.e. the investor has two choices –

  • Either ask the bank to not deduct TDS by submitting form 15H to the bank every year
  • In case if the TDS has got deducted, then they could ask for a refund

Interest rates on Fixed Deposits for Senior Citizens

Fixed Deposits for senior citizens are somewhat similar to what the usual Fixed Deposits are, except for the fact that the ones for senior citizens offer better interest rates and have certain limitations on their tenure. Here’s a list of top banks offering Fixed Deposits for Senior Citizens with their interest rates –

1. SBI – The interest rate offered by SBI is from 6.25% to 7.25% p.a. for a period of minimum 7 days to a maximum of 10 years
2. IDFC – IDFC offers an interest rate of 4.5% to 8.25% for a tenure of minimum 7 days to a maximum of 10 years
3. YES Bank – Yes Bank offers an interest rate of 5% to 7% p.a. for a minimum period of 7 days to a maximum of 10 years
4. ICICI Bank – The interest rate offered by ICICI Bank is 4% to 6.50% p.a. for a minimum tenure of 7 days to a maximum of 10 years
5. Central Bank of India – The interest rate offered by Central Bank of India is 4.75% to 6.50% p.a. for a minimum tenure of 7 days to a maximum of 10 years

TDS on Fixed Deposit for Senior Citizens

TDS is deducted by the bank, provided the aggregate income from interest rates of fixed deposits that you could possibly earn for all your deposits held in bank exceeds Rs. 10000 in a given financial year, irrespective of whether you are a senior citizen or not. If you wish to avoid this deduction, you can choose to split your FD investments into different banks or branches of the same bank in a way that the interest earned on those FDs do not exceed Rs. 10000.

Another way in which you could avoid TDS deduction is by timing the FD in such a manner that interest earned for any financial year does not exceed Rs. 10000. For example, you could start your 12-month FD in an odd month, say October, since the financial year closes in March so the interest would split in two financial years.

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