Senior Citizen? Save tax and earn up to 8% on tax saving fixed deposits

NEW DELHI, Dec 31: As the New Year 2023 kicks in, this is the right time for senior citizens to plan their investment and choose the tax-saving FDs to make the most of rising interest rates on deposits. This trend is likely to continue as lending has become expensive and banks want to lure investors to park their money with them to increase their cash flow.

Starting a tax-saving FD teaches a very important lesson, that is to save more. A penny saved is a penny earned. This is the rule of thumb, and it works well in favour of senior citizens as well. Here are some of the main features of tax-saving senior citizen FDs.

FDs come with the flexibility of tenure and amount. You can choose any tenure and amount that you want to invest.
Rising interest rates have instilled confidence in senior citizens to move back to their traditional investment strategy and park their money in fixed deposits (FDs). Post repo rate hikes by the RBI, several banks have hiked their FD interest rates. This has been the motivation for all the senior citizen investors to not only earn higher returns but also save tax while they plan their investments.
Fixed Returns
Many financial instruments see fluctuations when it comes to returns. Also, investors need to wait longer like three to five years on average for their investment to grow. On the other hand, FDs give you fixed returns risk-free. There is no risk to your money, and you get fixed returns.
Flexibility of Tenure
FDs come with the flexibility of tenure and amount. You can choose any tenure and amount that you want to invest. However, you need to have at least five years’ lock-in period for tax-saving FDs. Longer tenures help you accumulate a higher amount along with the interest. Many people choose a longer tenure for tax savings and a bigger maturity amount.
Zero Maintenance Cost
Unlike mutual funds and stocks, you don’t really need to keep a track of the market and fluctuations when you invest your money in FDs. It is one time activity, and you can get your matured amount once your FD completes its duration. There is no cost to anything. You put a certain amount in the FD account, and you get a lump sum amount when your FD matures.
Accessible Liquidity
Despite the lock-in period in case of tax-saving senior citizens FDs, you can still liquidate your investment when you need money due to any emergency. The lock-in terms and conditions are not very stringent as compared to other financial instruments. However, you must check with the bank for deductions and penalties when you opt for the early withdrawal.
Your money is entirely safe in an FD account till your bank defaults. Despite that, you are eligible to claim a maximum of Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) with effect from 4 February 2020. It makes FDs a very safe investment option for senior citizens.
Tax Savings
Tax deductions under Section 80C of up to Rs.1.5 lakh are allowed when you invest in a tax-saver FD with a minimum lock-in period of five years.
Data as on respective banks’ website on 27 Dec 2022;
Interest rate of all listed (BSE) Public & Pvt Indian Banks considered for data compilation; Banks for which data is not available on their website, are not considered. Table includes only Tax Saving FDs for Senior Citizens (excluding super senior citizens) for 5-Year tenure. *Assuming quarterly compounding of interest for all the bank;
Compiled by