Banks offer special FD scheme for the benefit of senior citizens

Various banks are offering a special fixed deposit scheme for senior citizens aged 60 years and above. The interest rate is about 6.5%, which is higher than the prevailing interest rate of about 5.7%. The scheme is available to resident senior citizens only.

Senior citizens generally depend on incomes such as pension, interest and dividends in their post-retirement years. The rate of interest offered is attractive in a low-interest rate scenario. The Reserve Bank of India recently reduced the base rate leading to a cut in the interest rate on all savings schemes.

The tenure of the special FD scheme and the interest rate depends on each bank offering the Special FD scheme. If you withdraw the FD prematurely, the interest rate reduces by 0.5% to 1%. 

Also Read: 5 Factors About COVID-19 Personal Loans You Should Know

The interest on the FD is not liable to TDS up to Rs 50,000 per bank. In case the interest exceeds Rs 50,000, the TDS is 7.5% on the whole of the interest paid by the bank. Senior citizens can claim the interest without TDS by submitting the form 15H.

Senior citizens aged 60 years and up to 79 years are entitled to a basic tax exemption limit of Rs 3 lakh. Super senior citizens aged 80 years and above are entitled to a basic tax exemption limit of Rs 5 lakh. A senior citizen whose estimated tax payable is nil for the financial year can submit form 15H to the bank for nil deduction of tax (TDS).

The interest income from special FD scheme is taxable income of the senior citizens. Senior citizens can also claim a tax deduction up to a maximum of Rs 50,000 on the interest income at the time of filing their income tax return.

For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in

You May Also Like

Taxation of dividend income received on or after 1 April 2020 (FY 2020-21)

You may receive a dividend from your equity or mutual fund investments.…
GSTR-9

CBIC has notified an extension of two months to various GST compliance

The government of India has notified yet another extension for the completion…
Gold Jewellery

24K Gold Rate in India for November 2019: Week 4

The fourth week began with the gold rate in India holding at…

Due date to file annual GSTR-4 for FY 2019-20 gets further extended

The government has further pushed the deadline to file the brand new…