FD investment: As investors enter their golden years, their investment appetite change as they tend to move towards safer tools from riskier ones. A fixed deposit (FD) is a financial instrument provided by various financial institutions such as banks and Non-Banking Financial Companies (NBFCs). Fixed deposits are known for their competitive interest rates, which are determined based on specific terms and conditions set by the institution. When you invest in a fixed deposit, the deposited amount is inaccessible for a fixed duration, ranging from as short as 7 days to as long as 10 years.
For senior citizens, fixed deposits (FDs) are considered a reliable source of income and capital security, making them a prudent financial choice, especially for older investors seeking stable returns. Due to their safety, predictability in returns, and competitive interest rates tailored for seniors, fixed deposits have gained significant popularity among this demographic.
In times of increased economic uncertainty and market fluctuations, it is observed that a significant number of senior citizens opt for less risky investment options. This decision stems from their preference to safeguard and grow their retirement funds. Consequently, they often choose to allocate their capital into fixed deposits, a secure investment option known for its stability and predictable returns. The rationale behind this choice lies in the desire to minimize exposure to the volatility of market-linked investments and ensure a reliable source of income during their retirement years.
Here are some of the best FD schemes with the highest interest rates:
As of August 12, 2024, some small finance banks are offering competitive fixed deposit (FD) interest rates for senior citizens. Here are the current offerings:
North East Small Finance Bank
Interest Rate: Up to 9.5% per annum
Tenure: Three years
Suryoday Small Finance Bank
Interest Rate: 9.1% per annum
Tenure: Three years
Utkarsh Small Finance Bank
Interest Rate: 9.1% per annum
Tenure: Three years
Jana Small Finance Bank
Interest Rate: 8.75% per annum
Tenure: Three years
Unity Small Finance Bank
Interest Rate: 8.65% per annum
Tenure: Three years
Equitas Small Finance Bank
Interest Rate: 8.5% per annum
Tenure: Three years
AU Small Finance Bank
Interest rate: 8%
Tenure: Three years for senior citizens
Other banks
Source: Groww
Taxation of fixed deposit income
In accordance with section 80TTB of the Income Tax Act, senior citizens are eligible to claim a deduction of up to Rs 50,000 on interest income accrued from various sources, which are as follows when cumulated:
> Interest income from bank savings and fixed deposits
> Interest earned on post office deposits
> Interest earned on deposits with a cooperative society engaged in banking activities, including cooperative land mortgage and land development banks.
Furthermore, it is noteworthy that no Tax Deducted at Source (TDS) will be withheld from interest payments up to Rs 50,000 within a single financial year. To prevent TDS deduction, a senior citizen can furnish Form-15H to the respective bank.
FD vs Senior Citizens Savings Scheme
The Senior Citizens Savings Scheme (SCSS) is a government-sponsored initiative designed to provide senior citizens with a secure and competitive investment option. This scheme offers an attractive interest rate of 8.2% to eligible senior citizens. Individuals can invest amounts ranging from Rs 1,000 to Rs 30 lakh in the SCSS. Moreover, investors can benefit from tax exemptions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. As a government-backed investment scheme, the SCSS ensures guaranteed returns on a quarterly basis, providing a reliable source of income for senior citizens. The lock-in period is for five years.