Fixed Deposit For Senior Citizen: Interest Rates, Term, Income Tax Benefit And Other Details

Major banks across the country offer an interest rate ranging from 4 to 7.75 per cent on fixed deposits of up to Rs 1 crore for a term lower than five years. India Post, which has a network of more than 1.5 lakh post offices across the country, pays an interest rate of 6.6-7.4 per cent on deposits for a term of 1-5 years. Most financial institutions pay slightly higher rates to senior citizens on bank deposits across several maturity periods (terms). According to financial planners, fixed deposits are suitable for investors looking for fixed returns with minimum risk. 

Major banks across the country offer an interest rate ranging from 4 to 7.75 per cent on fixed deposits of up to Rs 1 crore for a term lower than five years. India Post, which has a network of more than 1.5 lakh post offices across the country, pays an interest rate of 6.6-7.4 per cent on deposits for a term of 1-5 years. Most financial institutions pay slightly higher rates to senior citizens on bank deposits across several maturity periods (terms). According to financial planners, fixed deposits are suitable for investors looking for fixed returns with minimum risk. 

Here's a comparison of interest rates paid by State Bank of India, HDFC Bank, ICICI Bank and India Post (post office) to senior citizen customers on fixed deposits up to Rs 1 crore:

State Bank of India (SBI)

HDFC Bank

ICICI Bank

India Post

Income tax benefit for senior citizens on interest earned

According to income tax laws, interest income up to Rs 50,000 in a year from a fixed deposit earned by the senior citizen on a saving deposits or fixed deposit is eligible for deduction of taxable income.

While Section 80TTB of the Income Tax Act states that such income is eligible for income tax deduction, Section 194A mandates that no tax will be deducted at source  (TDS). That means senior citizens can enjoy income up to Rs 50,000 a year in the form of interest from a savings account or fixed deposit without having to bear any income tax. This is applicable on savings and fixed deposit accounts in a commercial bank, post office or co-operative bank, according to the taxman.