The investing avenues you opt for should be less and less speculative as you grow older, advise experts. This is why senior citizen investors prefer stable and secure investment options like bank fixed deposits (FDs). Additionally, investing in five-year tax-saving bank FDs comes with tax benefits.
(Do keep in mind that only those who opt for the old tax regime can benefit from the tax deduction available on the tax-saving FDs. This tax benefit is not available under the new tax regime.)
What are Tax-Saving Fixed Deposits?
One can earn interest and save taxes with a Tax-Saving Fixed Deposit (FD) account. It provides a tax deduction under Section 80C of the Income Tax Act, 1961 of up to Rs 1.5 lakh annually. The invested sum in this FD account is locked in for a period of five years during which it cannot be withdrawn. It is a feasible choice for people wishing to avoid taxes and receive a set return on their investment because the interest received is taxable and the interest rate differs from bank to bank.
Interest rates on senior citizen tax-saving bank FDs
Banks offers a higher interest rate on senior citizen bank FDs. Many banks offer higher interest rate of up to 0.50% per annum for senior citizen investors.
Here is a look at the interest rates offered by private and public sector banks on five-year tax-saving FDs.
Private banks tax-saving FD interest rates
|TX asvaing FD interest rate
|IDFC First Bank
|Kotak Mahindra Bank
Public Sector banks tax saving FD interest rates
|Tax saving FD interest rate
|Bank of Baroda
|Indian Overseas Bank
|Punjab National Bank
|State Bank of India
Source: Bank websites
Tax on interest earned
Income tax is levied on the interest income received from these tax-saving FDs. TDS is thus applied to such earned interest. However, a senior citizen can avoid or minimise TDS by submitting Form 15H to the bank. Under section 80TTB of the Income Tax Act, senior persons can deduct up to Rs 50,000 from the interest paid on tax-saving FDs.
How to submit FORM 15H in SBI to save tax
Step 1: Visit www.onlinesbi.com and login to your account.
Step 2: Under “e-services” select > Submit form 15G/H option as applicable to you.
Step 3: Select 15G if you are below 60 years
Step 4: Select the CIF number and click on submit.
Step 5: Select the branch code where the form is required to be submitted and click on submit.
Step 6: It will show details such as name, PAN of the assessee, address etc. then click on submit. Once the details are checked, click on ‘Confirm’.
Step 7: A one-time password (OTP) will be sent to your registered mobile number. Enter the OTP and click on confirm.
A UIN number will be produced as soon as the form is submitted properly. A copy of the completed form can be downloaded by clicking on the links that is displayed on the computer screen.