Reasons why senior citizens should invest in a tax-saving fixed deposit. Or

Advantages of tax-saving fixed deposits for senior citizens

invest in tax-saving fixed deposits

Investment is a major part of financial planning for all age groups. Age plays quite a significant role in determining where one invests his or her money. As you grow old, you start feeling the need for constant wealth generation without fearing any associated risk. You start saving up more and more for your family and children, their education, marriage, treatment, and so on. Thus, wealth cannot be invested in a volatile market in this situation.

The older one gets, the more responsibilities he or she is naturally expected to bear. Tax-Saving fixed senior citizens often prefer deposits. Thus, if you are 60 years old or older, you can invest in tax-saver fixed deposits for senior citizens. These FDs also offer higher interest rates for senior citizens. These are also designed to fulfil the investor’s requirements, keeping the low-risk appetite and desire for high returns. 

Related: Faq's about fixed deposits

Tax benefits

Section 80C of the Income Tax Act, 1961 even permits the investor, a senior citizen, to claim deductions up to Rs. 1.5 lakhs. They can claim a maximum of this amount in one whole financial year. A deduction of Rs 50,000 can also be claimed on the interest earned on tax-saving fixed deposits, according to Section 80TTB. This is a one-of-its-kind fixed deposit, as other FDs do not offer this to the investors. Thus, only senior citizens are eligible for this tax benefit. Tax-saving FDs can help senior citizens earn more interest than they would have gained from a savings bank account or a recurring deposit.

There is, however, a minor downside to this FD. The minor downside is that you have to invest for a minimum period of 5 years, and you cannot break it prematurely. Therefore, it will require you to follow financial discipline as you would not be permitted to withdraw the invested amount before five years. Your Tax-Saving FD account can be opened in any public or private bank. There are options for single ownership and joint ownership of this FD. However, you must appoint a nominee or more for such an account. The whole process is quite easy as it requires minimum documentation. The bank will clarify your doubts regarding the tax-saving fixed deposit before investing your hard-earned money. 

Related: Best rates for banks fixed deposits in India

Rates offered by various banks

One thing you can do to boost your interest from the FD is to check and compare the rates of interest offered by several other banks for a tax-saving FD account. The State Bank of India offers the highest interest rate of 6.45% among public banks. Banks like Yes Bank and IndusInd Bank offer the highest interest rate at 7.50% among private banks. Lastly, Ujjivan Small Finance Bank has an interest rate of 7.95%. 

Here is a table with some other banks and their interest rates for a tax-saving FD account:

banks and interest rates for a tax-saving FD account

Related: How to save income tax by investing in fixed deposits?

SBI Fixed Deposit New Interest Rate from 13 August'2022


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