Investment-saving: Senior citizen’s last chance to get more interest and benefit from TDS deduction
New Delhi| The 0.25 per cent repo rate cut by the Reserve Bank of India is good news for borrowers, but bad news for fixed deposit (FD) investors. Investors have the last chance to keep fixed deposit investments at the current high rates, as banks will soon start reducing interest rates. If you are a senior citizen and have extra amount to invest in FD, then this can be the best time to deposit. Currently, small finance banks are offering the highest interest to senior citizens. Unity Small Finance Bank is offering the highest interest of 9.5 per cent annually for 1001 days. Suryoday Small Finance Bank is offering 9.1% interest on FD for a period of 5 years, while Utkarsh Small Finance Bank is offering 9.1% per annum interest on a period of two to three years.
FD in private banks is getting less interest than small finance banks. The rate here is 7.5 per cent to 8.75 per cent annually. Bandhan Bank is offering the highest interest of 8.55 per cent for a period of one year. DCB Bank, on the other hand, is offering 8.55 per cent interest for 19-20 months. Government banks are paying up to 7.55 per cent interest on deposits. Among these, Punjab and Sindh Bank and Bank of Maharashtra are giving the highest 7.95 per cent.
In the kind of environment, it would be right to use different means for investment. There are huge fluctuations in major investments ranging from stock market to currency and gold and silver. In such a situation, diversification is better. For example, 100 rupees is so out of that, 30 rupees you invest in FD. Put Rs 30 in the stock market, Rs 20 in mutual funds, Rs 10 in gold and Rs 10 in other instruments with insurance. Keep in mind that the investment must be targeted. When you invest money in any instrument with a goal, you know what is happening with that investment and whether it is giving returns as per your needs or not.
From April 1, 2025, the tax deducted on FD of senior citizens will be less. This is because the limit of TDS deduction has been increased from Rs 50,000 to Rs 1 lakh at present. For senior citizens, TDS will be applicable on interest income from savings accounts, FDs and recurring deposits if the total interest income in a financial year exceeds Rs 1 lakh. However, the limit of TDS for common people has been kept at Rs 50,000 only.
Analysts advise that after the repo rate cut, the government will scissor the interest rates of small savings schemes. Its effect may be visible in the April-June quarter. The interest rates of small savings schemes are always based on the interest rates of banks. In such a situation, if banks start reducing rates, it will affect even small schemes. If you have invested in small savings schemes and that investment has matured, then you can withdraw it and invest it in FDs with high interest rates.
Keep in mind not to fix the FD for too long. If you have Rs 5 lakh then fix it as five different FDs. Their duration should not exceed a maximum of one or two years. Because suppose if banks increase interest rates on FDs in future, it will have a direct impact on your long-term deposits. Due to the situation around the world, there is very little possibility that the rate cut will be higher. However, there is still room for a rate cut twice this year which could be as high as 0.50 per cent.
