FD rates for senior citizens in November: 13 banks offer 8.5%+ interest

If you're a senior citizen in India exploring fixed deposits (FDs), you're likely aware of their enduring popularity. With various banks offering competitive interest rates above 8.5%, FDs remain a go-to choice for safe, predictable returns.

 

Private and small finance banks in India are currently offering FDs with rates over 8.5% for specific tenures. For instance:

 

Unity Bank offers rates up to 9.5% for 1001-day FDs. NorthEast Small Finance Bank also stands out with a rate of 9.5% for tenures ranging from 546 to 1111 days.

 

Other small finance banks like Suryoday, Jana, and Equitas provide competitive rates between 8.5% and 9.1% for different tenures.

 

 

Is it safe to keep your money in small finance banks?

 

Yes, small finance banks provide safety through the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India (RBI). Deposits up to Rs 5 lakh per bank, covering both principal and interest, are insured under this scheme.

 

“To minimise risks, you can diversify your deposits across multiple banks, ensuring full coverage under the DICGC limit,” says Gaurav Aggarwal, Chief Business Officer of Paisabazaar.

 

How is FD interest taxed?

 

FD interest income in India is taxable, depending on the amount earned:

 

Tax slab-based taxation: The interest from FDs is added to your income and taxed as per your income tax slab.

TDS: If your annual FD interest exceeds Rs 40,000 (Rs 50,000 for senior citizens), the bank deducts 10% TDS under Section 194A. Without a PAN, the rate goes up to 20%.

 

“If your total income falls below the taxable limit, you can submit Form 15G (or Form 15H for senior citizens) to avoid TDS deductions,” says Vijay Kuppa, CEO of InCred Money. For instance, if you’re due Rs 1,000 in interest and 10% TDS applies, you’d receive Rs 900, with the bank forwarding the deducted amount to the government.

 

Key tax points on FD interest

 

Interest over Rs 40,000 (Rs 50,000 for seniors) leads to TDS deductions.

Providing PAN is crucial to keep the TDS rate at 10%.

Form 15G/15H helps avoid TDS for low-income individuals.

 

Highest FD rates offered by small finance banks

 

Here are small finance banks' FD rates for various tenures, based on information from Paisabazaar as of November 6, 2024:

 

AU Small Finance Bank: Highest rate of 8.5% for 18 months.

Equitas Bank: Up to 8.75% for 444 days.

ESAF Bank: Maximum of 8.75% for 2 to 3-year deposits.

Jana Bank: Offers 8.75% on 1 to 3-year FDs.

Unity Bank: 9.5% for 1001 days.

 

Private sector banks' FD rates (8.5% and more)

 

Bandhan Bank: 8.55% for a 1-year tenure.

RBL Bank: 8.6% for a 500-day term.

SBM Bank India: Offers up to 8.75% for above 18 months, less than 2 years and 3 days.

 

Benefits of FDs for senior citizens

 

FDs offer several advantages for senior citizens:

 

Higher interest rates: Special rates ensure more substantial earnings.

Steady growth: A safe avenue for secure, gradual growth.

Regular income: FDs allow converting interest into monthly income, ideal for retirement.

Tax savings: Senior citizen FDs are eligible for deductions under section 80C.

Flexible interest payouts: Choose monthly, quarterly, or annual payouts for a consistent income flow.

 

Eligibility and documents for senior citizen FDs

 

To qualify for senior citizen FDs:

 

Eligibility: Must be an Indian resident or an NRI with an NRE or NRO account, aged 60 or above. Some banks accept early retirees aged over 55.

Documents: Age proof, passport, Aadhaar, PAN, and a recent photograph.

 

Can you withdraw an FD early?

 

Yes, early FD withdrawal is allowed, but it affects returns due to recalculated interest based on the shorter tenure. A penalty may also be imposed, lowering the final payout. "Plan your FD tenure according to liquidity needs to avoid penalties," suggests Adhil Shetty, CEO of BankBazaar.

 

How often is FD interest compounded?

 

"Compound interest on FDs can be applied at different frequencies, such as annually, semi-annually, quarterly, or monthly, increasing returns compared to simple interest," says Shetty.