Interest Rates: These banks are offering up to 8.4% interest on FDs, but caution is necessary when investing..

Some banks are still offering senior citizens (aged 60 and above) higher interest rates of up to 8.4% on fixed deposits (FDs). This interest rate is applicable for a 5-year term and a maximum deposit of ₹3 crore. These include Suryoday Small Finance Bank, Jana Small Finance Bank, and Utkarsh Small Finance Bank. However, experts advise caution when depositing money in FDs with small finance banks. Let's see which banks are offering FD interest rates of up to 8.4% for senior citizens.

Suryoday Small Finance Bank is offering 8.4% interest on 5-year FDs for senior citizens. Similarly, Jana Small Finance Bank is offering 8% interest on 5-year FDs for senior citizens. Utkarsh Small Finance Bank is offering up to 7.75% interest on 3-year FDs. Deposits in small finance banks are insured up to ₹5 lakh by the DICGC (Deposit Insurance Credit Guarantee Corporation).

What precautions should be taken?
However, experts advise caution when investing in FDs with these banks. Their operating procedures are slightly different. Therefore, the risks of investing in them may differ slightly from those of regular commercial banks. To minimize potential risks, investors are advised to invest only as much in small finance bank FDs as is covered by the DICGC. By doing so, your principal and interest are protected in the event of any unforeseen event.

When is TDS deducted from bank FDs?
Banks deduct TDS (Tax Deducted at Source) on interest earned on fixed deposits (FDs) if your interest earned with a single bank exceeds ₹1 lakh. You can withdraw it or adjust it against your total tax liability when filing your Income Tax Return (ITR). Furthermore, if you are entitled to a tax refund, you may also receive interest on that refund.

For example, if a senior citizen has an annual income of ₹11 lakh, they will not have to pay any income tax under the new tax system for FY 2025-26 due to the Section 87A tax exemption. Under the new tax system, the Section 87A tax exemption for FY 2025-26 is available on income up to ₹12 lakh. Additionally, senior citizens can file Form 15H to avoid TDS deductions if their total income, after all tax deductions and Section 87A exemptions, is below the taxable limit. This limit is ₹12 lakh for the new tax system and ₹5 lakh for the old tax system.

TDS
Even though annual incomes below ₹12 lakh are exempt from income tax, banks and other financial institutions deduct TDS. This is because they are legally required to deduct TDS when the amount of interest or income exceeds a certain threshold. For senior citizens, this threshold is ₹1 lakh. Banks are unaware of an individual's tax liability. Therefore, they deduct TDS when the annual interest exceeds ₹1 lakh. Therefore, it is necessary to submit Form 15H to inform banks.

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