look news india
Commercial and small finance banks across the country have revised their fixed deposit (FD) interest rates amid the festive season and increase in loan demand. Even after the Reserve Bank of India (RBI) has kept the repo rate stable, banks are offering the most attractive rates to elderly investors to attract deposits (credit-deposit ratio). Senior citizens (aged 60 years and above) are being given additional interest ranging from 50 basis points (0.50%) to 75 basis points compared to general customers. Institutions like Unity Small Finance Bank, Utkarsh Small Finance Bank, Suryoday Small Finance Bank and Shivalik Small Finance Bank are offering record interest rates ranging from 8.50% to 9.00% to senior citizens on select tenures, while major large banks (SBI, PNB, HDFC, ICICI) are offering interest rates ranging from 7.50% to 7.80%.
In Indian banks, interest on fixed deposits is calculated on the basis of quarterly compounding instead of simple interest. This means that every three months the interest earned is added to the principal amount and interest is paid on that entire cumulative balance for the next three months. If a senior citizen chooses the cumulative/re-investment option, the effective annual yield increases from the nominal rate of 8.50% to around 8.77%.
If a senior citizen fixes a lump sum amount of ₹10,00,000 at an interest rate of 8.50% for a tenure ranging from 1 year to 5 years, the maturity amount and net interest details will be as follows:
| Investment Tenure | Interest Rate (Annual) | Total Interest Profit (Compounded) | Total Maturity Amount (Principal + Interest) |
| 1 year | 8.50% | ₹87,748 | ₹10,87,748 |
| 2 years | 8.50% | ₹1,83,196 | ₹11,83,196 |
| 3 years | 8.50% | ₹2,87,019 | ₹12,87,019 |
| 5 year | 8.50% | ₹5,22,795 | ₹15,22,795 |
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Duration of 1 year: On depositing ₹10 lakh, you will get interest of ₹87,748 at the end of the year and the total amount will be ₹10.88 lakh.
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Duration of 3 years: On completion of three years, the interest will increase to ₹2.87 lakh and ₹12.87 lakh will be deposited in the account.
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5 year period: By fixing the money for five years, the total interest will be ₹ 5.23 lakh, that is, your total amount will increase by more than 50% to ₹ 15.23 lakh.
If a senior citizen wants a regular income for their monthly medicine and household expenses instead of a lump sum on maturity, they can choose the Non-Cumulative (Monthly/Quarterly Payout) option:
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Monthly Pay-out: @ 8.50% on ₹10 lakh per month approx ₹7,083 Your regular pension will continue to be transferred to your savings account.
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Quarterly Interest: every three months straight ₹21,250 Will receive interest payment.
At present, major small finance banks are at the forefront among the banks offering interest ranging from 8.25% to 8.75% or 9.00% to senior citizens. Unity Bank is offering interest ranging from 8.90% to 9.00% on tenure of 1001 days, Suryoday Bank is offering interest ranging from 8.60% on tenure of 2 to 3 years, and Utkarsh Small Finance Bank is offering interest ranging from 8.50% on tenure of 2 to 3 years. In contrast, public sector banks like State Bank of India (SBI Amrit Kalash/400 days) and PNB are offering up to 7.75% interest to senior citizens on special FDs of 400 to 444 days.
Investors should keep in mind the safety rules while availing the benefit of higher interest in small finance banks. wholly owned subsidiary of the Reserve Bank DICGC (Deposit Insurance and Credit Guarantee Corporation) Under this, the principal and interest amount up to ₹ 5 lakh of every account holder in every bank is 100% guaranteed. Therefore, while investing ₹ 10 lakh, financial advisors suggest that instead of investing the entire amount in one small finance bank, divide ₹ 5 lakh each in two different banks, so that 100 percent of the capital remains under government protection.
Income tax section on interest income from bank FD for senior citizens 80TTB Under this, exemption up to ₹ 50,000 is available in a financial year. If the total interest received from all banks in a financial year exceeds ₹50,000, banks deduct TDS at the rate of 10%. If your total annual income is less than the taxable slab, deposit the same in the concerned bank at the beginning of the financial year to avoid TDS deduction. Form 15H Deposit is mandatory.