Top 15 banks giving highest interest rate on FDs to senior citizens; check them out

Most retired people think that now they do not have a strong income stream to support their livelihood, and they should focus on capital preservation and invest in fixed deposits. For them, regular cash flow is more important than higher returns. It is for this reason that fixed deposits are the prime choice for most retirees to receive regular cash flow in the form of interest income.

The good news is interest rates have been on an upward trajectory with the increase in repo rates -- the rate at which banks borrow from the central bank -- by the Reserve Bank of India (RBI). The key benchmark lending rate has risen significantly by 225 bps to 6.25 percent over the last six months since the bottom of 4 per cent in April 2020. Though inflation is in control and interest rates are expected to stabilize in long run, the Monetary Policy Committee is expected to announce the repo rate hike tomorrow by 25 bps, according to experts.  

Here is a comparison of how leading banks are offering interest rates on fixed deposits for senior citizens:

People generally keep post-retirement corpus in conservative instruments like fixed deposits. The advice is to revisit your asset allocation plan regularly and see if you can allocate more in other instruments such as debt funds, Senior Citizen Saving Scheme, PPF to achieve a higher rate of return. Recently Nirmala Sitharaman proposed to hike the upper limit from Rs 15 lakh to Rs 30 lakh for Senior Citizens Savings Scheme, which is currently offering 8 per cent per annum. 

Fixed deposits are popular investment options for the safe parking of short-term money. One of the key differences between the fixed deposit and debt funds is that fixed deposits have a predetermined rate of return whereas liquid funds or Ultra Short Duration Funds invest in money market instruments and hence their rate of return may vary depending upon market conditions. Moreover, the interest income on fixed deposits is treated as income from other sources and is taxed as per the income tax slab one falls into. In the case of debt funds, it is treated as short or long-term capital gain depending on the period of holding. If sold after 3 years, it is treated as long-term capital gain and taxed at 20 per cent with indexation. If sold before 3 years, it is treated as short-term taxable gain and taxable as per your tax slab.

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