Senior citizens looking for a boost in their savings can benefit from fixed deposits (FDs), with many banks offering competitive interest rates.
A key driving factor behind the surge in senior citizen deposits is the offer by banks to provide an additional 50 basis points over the card rate for the general public. Moreover, banks like SBI and HDFC have introduced special fixed deposit schemes with higher interest rates of 75 basis points for senior citizens compared to regular card rates. Additionally, schemes like SBI Green Rupee Term Deposit offer an additional 100 basis points for retail deposits with a tenure of 2222 days.
Senior citizens also enjoy a higher threshold for tax deducted at source (TDS).
The interest rates mentioned apply to fixed deposits of up to Rs 2 crore. Here are some of the top FD rates for senior citizens across various banks:
DCB Bank
DCB Bank offers a senior citizen rate of 8.6% for FDs with terms of 25 to 26 months.
IDFC First Bank
IDFC First Bank provides a rate of 8.5% for 500-day FDs.
Bandhan Bank
Bandhan Bank has a rate of 8.35% for FDs maturing in one year.
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IndusInd Bank and YES Bank
IndusInd Bank and YES Bank both offer rates of 8.25% for terms ranging from one to two years.
DBS and Karur Vysya Bank
DBS Bank India and Karur Vysya Bank offer rates of 8% for FD terms between 376 to 540 days and 444 days, respectively.
Tamilnad Mercantile Bank
Tamilnad Mercantile Bank also offers an 8% rate for 400-day FDs.
Source: Paisabazaar
On TDS, banks must deduct it on FD interest exceeding Rs 50,000 annually, irrespective of the senior citizen’s tax regime. However, seniors can avoid TDS by submitting Form 15H if their net taxable income is expected to be below the exemption threshold.
While TDS is distinct from income tax, any excess TDS deducted can be claimed as a refund when filing tax returns, potentially with interest from the Tax Department.
According to SBI Research Ecowrap, there are approximately 74 million term deposit accounts held by senior citizens in the country, with a total deposit amounting to Rs 34 lakh crores. This marks a substantial increase from the estimated 41 million accounts with a total deposit of Rs 14 lakh crores in FY19, indicating an 81% growth in the number of accounts and 143% growth in the deposit amount over a span of 5 years.
The average balance in these accounts has also seen a significant increase of 38.7%, rising from Rs 3.3 lakh crore to Rs 4.6 lakh crore.
Read More: Banks With Highest FD Interest Rates For Senior Citizens
The total interest earned by senior citizens is estimated at Rs 2.7 lakh crore, with Rs 13,299 crore from SCSS and Rs 2.5 lakh crore from senior citizen bank deposits. Assuming an average tax payment of 10% by senior citizens, the government stands to receive around Rs 27,106 crore in taxes from senior citizen deposits, as per the report.
