Some banks are currently giving higher fixed deposit (FD) interest rates of up to 8.4% for senior citizens (60 years and above).
These rates apply on deposits for a 5-year tenure, with a maximum investment limit of up to ₹3 crore.
Suryoday Small Finance Bank: 8.4% on 5-year FDs
Jana Small Finance Bank: 8% on 5-year FDs
Utkarsh Small Finance Bank: 7.75% on 3-year FDs
Deposits in these small finance banks are insured up to ₹5 lakh by the DICGC (Deposit Insurance and Credit Guarantee Corporation).
Precautions Before Investing
Experts advise being cautious when investing in the FDs of small finance banks, as they operate differently compared to large commercial banks.
The safest way to invest is to limit deposits up to the DICGC insurance cover of ₹5 lakh, which ensures both the principal and interest remain protected in case of any unexpected issues.
TDS on Bank FDs
Banks deduct TDS (Tax Deducted at Source) if the annual interest earned from FDs in one bank exceeds ₹1 lakh for senior citizens.
This deducted amount can be adjusted at the time of filing your Income Tax Return (ITR).
If eligible, you may also receive interest on refunds.
Tax Benefits for Senior Citizens
Under the new tax system for FY 2025-26, senior citizens with income up to ₹12 lakh do not have to pay tax due to the exemption under Section 87A.
To avoid unnecessary TDS, senior citizens can submit Form 15H if their taxable income is below the exemption limit (₹12 lakh under the new system, ₹5 lakh under the old system).
