As investors enter their retirement years, their investment preferences often shift from riskier assets to safer, more stable options. A fixed deposit (FD) is a popular financial instrument offered by various banks and Non-Banking Financial Companies (NBFCs). Known for their competitive interest rates, FDs provide a secure way to grow your savings, with the interest rates determined by the specific terms set by the financial institution. When you invest in a fixed deposit, your money is locked in for a fixed period, which can range from as short as 7 days to as long as 10 years.
For senior citizens, fixed deposits are a reliable source of income and capital preservation, making them an ideal choice for those looking for stable returns. Due to the safety, predictability, and competitive interest rates tailored for seniors, fixed deposits have become increasingly popular among older investors.
In times of economic uncertainty and market volatility, many senior citizens gravitate toward safer investment options. This shift is driven by their need to protect and grow their retirement savings. As a result, they often prefer to invest in fixed deposits, which offer security and predictable returns. The primary reason for this choice is to minimize exposure to the risks associated with market-linked investments and ensure a dependable income during retirement.
Here are some of the best FD schemes with the highest interest rates as of August 12, 2024:
Top FD Schemes for Senior Citizens
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% per annum
- Tenure: Three years for senior citizens
Also Read: Budget 2024: 7 Expected Income Tax Benefits from Finance Minister Nirmala Sitharaman on July 23
Taxation of Fixed Deposit Income
Under Section 80TTB of the Income Tax Act, senior citizens are eligible for a deduction of up to Rs 50,000 on interest income earned from the following sources:
- Bank savings and fixed deposits
- Post office deposits
- Deposits with a cooperative society engaged in banking, including cooperative land mortgage and land development banks
Additionally, no Tax Deducted at Source (TDS) will be withheld from interest payments up to Rs 50,000 in a single financial year. To avoid TDS deduction, senior citizens can submit Form-15H to their bank.
FD vs Senior Citizens Savings Scheme
The Senior Citizens Savings Scheme (SCSS) is a government-backed initiative offering senior citizens a secure and attractive investment option. The SCSS currently provides an interest rate of 8.2% for eligible senior citizens. Individuals can invest amounts ranging from Rs 1,000 to Rs 30 lakh in the scheme. Furthermore, investors can claim tax exemptions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. With a five-year lock-in period, the SCSS ensures guaranteed quarterly returns, offering a reliable income stream for senior citizens.