The elderly who want to find secure revenues in 2025 have every reason to smile. Some of the small finance banks interest rates are fixed as high as 8.5 percent on three years. Utkarsh Small Finance Bank comes on top and is followed by Jana and Slice Small Finance Banks at 8.25 and Suryoday at 8.152. These interest rates are also applicable on deposits worth 3 crore and below and is therefore dear to the retirees who would like to increase their savings.
Although such offers may be too tempting, professionals recommend caution. The small finance banks deposit is covered under DICGC up to 5 lakh only. Investors will want to have minimum exposure to such insured limit in order to avoid risk. This will keep the principal as well as the interest intact in the event of an unexpected event, more so, to the recipients of the monthly income.
Tax Implications and TDS Thresholds
Regardless of the high rates of interest, senior citizens should observe deduction of taxes. The banks must deduct TDS on an interest income whose annual income is above 1 lakh. It is so even when the total income of the person is below the taxable limit. In order not to take a deduction that is unnecessary, seniors might drop Form 15H, stating their income is less than the exemption level.
According to the new tax regime, this means that senior citizens who have an annual income of up to 12 L will be entitled to a 100 percent rebate as per Section 87A of the Income Tax Act. But banks are not prohibited to deduct TDS without any notification. By filing Form 15H, one enjoys a smooth credit and not to receive a delayed refund in filing of income tax.
Public Sector and Private Bank Offerings
The senior citizen tax withholding rate on FD stands at 7.05 percent and 7.55 percent by major Public Sector Banks such as SBI, PNB and Indian Overseas Bank. ICICI, HDFC and Axis Bank are the few names of the banks which offer 7.10-7.25 % interest on the tenure and scheme basis. Although this is at slightly lower rates as compared to small finance banks, they come with greater coverage and less risk undertaking.
The Senior Citizen Savings Scheme (SCSS) is one of the most competitive with an interest of 8.2 per cent annually that is paid quarterly. With the support of the Government of India, SCSS also offers tax relief under Section 80C; thus, it is a perfect scheme for someone who demands safety and returns.
Also Read: Income Tax Rules 2025: ₹12 Lakh Income? You May Pay Zero Tax Under the New Rules