look news india
For retired elders and senior citizens, managing monthly expenses and protecting their lifelong wealth is the biggest priority. Fixed Deposit i.e. FD is still the most preferred means of senior citizens of the country to get safe and assured returns by staying away from the risk of stock market. While major government and private banks of the country are offering interest between 6.50% to 7.50% on 5-year FD, some select Small Finance Banks (SFBs) are offering annual interest of up to 8.25% for a period of 5 years to senior citizens. From major business and residential areas like Hazratganj and Gomti Nagar in Lucknow, the capital of Uttar Pradesh, to the metros of the country, many senior citizens are turning to new banks to take advantage of these higher interest rates. The biggest advantage of this long term FD is that investors lock in a fixed return for the next 5 years, so even if interest rates fall in the future, their returns are not affected.
Currently, small finance banks are offering additional interest of up to 50 basis points (0.50%) to senior citizens compared to general citizens for a tenure of 5 years. Suryoday Small Finance Bank is offering the highest interest of 8.25 percent to senior citizens on 5-year fixed deposits. Apart from this, Jana Small Finance Bank is providing interest at the rate of 7.77 percent and Ujjivan Small Finance Bank is providing interest at the rate of 7.20 percent. Equitas Small Finance Bank, Utkarsh Small Finance Bank and Slice Small Finance Bank are offering 7.00 per cent returns on 5-year FD, while AU Small Finance Bank is offering 6.75 per cent, Shivalik Small Finance Bank 6.25 per cent and ESAF Small Finance Bank 5.75 per cent. Talking about big private sector banks, DCB Bank is offering up to 8.00 percent interest on 5 year FD, while Axis Bank and IndusInd Bank are offering around 7.50% to 7.75%. In the country’s largest government bank SBI and private sector giants HDFC and ICICI Bank, senior citizens get interest around 7.00% to 7.50% on 5 year FD.
Seeing high interest rates, the question often arises in the minds of elderly investors whether their money will be safe in small finance banks. As per the regulations of the Reserve Bank of India (RBI), all scheduled small finance banks come under the direct regulation of RBI. The most important thing is that the insurance cover of Deposit Insurance and Credit Guarantee Corporation i.e. DICGC is applicable on these banks also. Under this rule, the total deposit of every account holder in every bank up to Rs 5 lakh including principal and interest is completely safe and insured. Financial experts recommend that instead of investing their entire savings in a single bank to avail higher returns, senior citizens should invest in slabs of less than Rs 5 lakh each in different banks so that 100 percent of their money remains under government protection.
By investing in a 5-year tax saver FD, one gets the benefit of tax deduction of up to Rs 1.50 lakh in the old tax regime under Section 80C of the Income Tax Act. However, the interest received from FD adds to the total annual income of the investor and is taxable as per the slab. For senior citizens, there is a special provision of tax exemption of up to Rs 50,000 per year on interest received from bank and post office deposit schemes under Section 80TTB of the Income Tax Act. If the total interest earned in a financial year is less than Rs 50,000, no TDS is deducted by the bank. If the total annual income of a senior citizen is less than the taxable limit, they can get the TDS deduction stopped by submitting Form 15H (declaration form) to the bank at the beginning of the financial year itself.
Senior citizens must assess their liquidity and monthly cash requirements before getting a 5 year FD. Tax saver FD has a lock-in period of 5 years, which cannot be broken prematurely in case of emergency. If you need regular monthly or quarterly pension-like income, choose the non-cumulative option, where the interest comes directly into your bank account. If you are investing with the aim of capital appreciation, choose the cumulative option to get the full benefit of compound interest. Also, never forget to enter the name of the nominee in your FD account.