FD Rates Hit 8.8%! Senior Citizens Can Lock in High Returns—But There’s a Catch

Senior citizens looking for safe, high-yield investment options have reason to cheer. Several small finance banks are now offering fixed deposit (FD) interest rates as high as 8.8% for a three-year tenure—among the highest in recent years. However, financial experts urge caution and recommend staying within the DICGC insurance limit of ₹5 lakh.

Leading the pack is Suryoday Small Finance Bank, which is offering 8.8% interest on FDs for senior citizens for a three-year term. Utkarsh Small Finance Bank follows closely with 8.75%, while Unity Small Finance Bank is offering up to 8.5%. Slice and Jana Small Finance Banks are also in the race, offering 8.25%.

This surge in FD rates is especially beneficial for retirees seeking low-risk, high-return avenues in a time of market volatility. But experts caution against overexposure to these banks. Since small finance banks carry different risk profiles compared to traditional commercial banks, it's advisable to cap FD investments within the ₹5 lakh DICGC insurance cover to ensure capital safety.

In addition to the attractive interest rates, senior citizens also need to factor in the Tax Deducted at Source (TDS) on FD interest. TDS is applicable if annual interest exceeds ₹1 lakh, even if the total income is not taxable. This often happens because banks are not aware of the investor’s overall tax status. However, senior citizens can submit Form 15H to prevent TDS if their taxable income—after deductions and rebates under Section 87A—falls below the threshold (₹12 lakh under the new regime for FY 2025-26).

While these FD rates may be tempting, financial planners advise a diversified investment strategy, including debt funds, senior citizen saving schemes (SCSS), and tax-free bonds to balance safety and returns.

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