As people age, they tend to adopt investment options that are less speculative and more secure. This is particularly relevant for senior citizens who aim to maximize their savings while minimizing their tax obligations. As a result, fixed deposits (FDs) have become increasingly popular as a preferred investment option for senior citizens. Furthermore, tax-saving fixed deposits have emerged as a sought-after option for senior citizens whose income attracts tax liability. This investment option optimizes their savings while lowering their tax liabilities.
Keep reading to explore the various features and benefits of tax-saving fixed deposits for senior citizens.
Features of a Tax-Saving Fixed Deposit
Listed below are some of the key features of a tax-saving fixed deposit (FD):
|Tax Benefits||Investments of up to Rs. 1.5 lakh are eligible for income tax exemption|
|Taxable Interest||The interest earned through a tax-saving FD is taxable and subject to source deduction|
|Lock-in Period||It has a five-year lock-in period|
|Auto-renewal Option||There is no auto-renewal facility|
|Premature Withdrawal||Premature withdrawals, overdrafts, or loan facilities are unavailable for tax-saving FDs.|
|Interest Rates||Tax-saving FD interest rates remain unchanged over the five-year period.|
|Interest Payouts||Investors can opt for monthly or quarterly payouts or reinvest the interest in the principal amount.|
|Ownership||It might be held either individually or jointly. Tax benefits, however, are only available to the first account holder in a joint tax-saving FD.|
Benefits of Investing in A Tax-saving Fixed Deposit
Tax-saving fixed deposits typically provide higher returns in comparison to regular fixed deposits. In fact, most banks tend to offer slightly higher interest rates in tax-saving FDs to senior citizens. This makes them an attractive investment option for senior citizens seeking to save on taxes while earning substantial returns on their savings.
These FDs are regarded as a secure investment option as they are backed by the government and are not affected by market fluctuations. Therefore, they are ideal for risk-averse investors who prefer stability over high returns.
Lump Sum Deposit
A tax-saving fixed deposit lets you deposit a sizable sum of money at once. It is beneficial for senior citizens who have substantial surplus savings.
Senior citizens can benefit from a tax deduction of up to Rs. 1.5 lakh annually with a tax-saving fixed deposit under Section 80C of the Income Tax Act, 1961.
Tax Benefit on Interest Earned
These FDs generate interest income subject to income tax and TDS deduction. However, senior citizens can avoid or minimise TDS by submitting Form 15H to the bank. Additionally, senior citizens can claim a deduction of up to Rs. 50,000 on the interest earned from tax-saving FDs under Section 80TTB of the Income Tax Act.
Incorporating tax-saving fixed deposits in their investment portfolio can help retired investors ensure a financially secure future. While other investment options may offer better returns, they also carry a higher risk. As an individual’s risk-taking ability decreases after retirement, fixed deposits become a more appealing investment option.
So why wait? Invest in tax-saving fixed deposits today and experience the reassurance of having your money secured while also saving on taxes.