If you are 60 years or older and want to invest your savings safely while earning attractive returns, a Fixed Deposit (FD) can be a smart choice.
At present, several small finance banks are offering up to 8.3% annual interest on 3-year FDs for senior citizens.
These rates are applicable on deposits of up to ₹3 crore. Before investing, it is a good idea to compare FD interest rates across different banks to get the best return.
Banks Offering the Highest FD Interest Rates
Among small finance banks, Jana Small Finance Bank is offering the highest interest rate of 8.30% per year for senior citizens on 3-year fixed deposits.
Here are some of the other banks and their current FD interest rates:
Jana Small Finance Bank – 8.30%
Utkarsh Small Finance Bank – 8.00%
Shivalik Small Finance Bank – 8.00%
AU Small Finance Bank – 7.90%
Ujjivan Small Finance Bank – 7.75%
Equitas Small Finance Bank – 7.60%
Slice Small Finance Bank – 7.50%
Suryoday Small Finance Bank – 7.40%
ESAF Small Finance Bank – 6.50%
Don’t Ignore the Safety Factor
While these banks offer higher interest rates, experts recommend understanding the risks before investing.
Deposits in small finance banks are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) for up to ₹5 lakh per depositor.
This means if anything unexpected happens to the bank, only deposits up to this limit are protected.
To stay on the safer side, experts suggest keeping your FD investment within the ₹5 lakh insurance limit in any one small finance bank.
When Does the Bank Deduct TDS?
Banks deduct Tax Deducted at Source (TDS) if the total interest earned on your fixed deposits in a financial year exceeds ₹1 lakh with a single bank.
However, TDS is not an extra tax. It is adjusted against your total tax liability when you file your Income Tax Return (ITR).
If more tax has been deducted than required, you can claim the excess amount as a refund.
How Senior Citizens Can Avoid TDS
According to Chartered Accountant Dr. Suresh Surana, senior citizens whose total tax liability is zero can avoid TDS by submitting Form 15H to their bank.
Under the new tax regime, eligible taxpayers with income up to ₹12 lakh can claim tax relief under Section 87A.
If you qualify and submit Form 15H on time, the bank will not deduct TDS from your FD interest.
If your income exceeds the prescribed limit, TDS will still be deducted.
However, if excess tax has been collected, you can claim it back by filing your Income Tax Return.