Post-retirement, people want to invest their hard-earned money into some guaranteed and lucrative options like fixed income securities. Fixed deposit is the easiest of options.
Above a minimum annual income, people have to pay income tax on their annual income. Apart from this income, citizens are liable to pay income tax on interest income as well, like FDs, etc. Senior citizens are not an exception to this rule. Under the Income Tax Act, the bank or financial institution needs to deduct tax at source to account for taxes on interest earned on FDs and other interest-bearing investments.
Amendment on Tax Law
The Union budget of 2018-2019 has brought major changes to these policies. The Central Board of Direct Taxes (CBDT) announced that Indian citizens above 60 years (senior citizens) who have a taxable income of up to INR 5 lakhs per year will now be exempted from paying income tax on interest income. Earlier this limit was INR 2.5 lakhs/annum. Under section 87A, the rebate on tax has been increased to INR 12,500 from INR 2,500. This is a section declaring the new rebate for people earning less than INR 5 lakhs in a year.
How to avail TDS Exemption?
To avail this TDS exemption, the senior citizens have to submit Form 15H in the financial institutions at the beginning of the financial year.
The CBDT says the banks and other financial institutions must accept the Form 15H of the individuals whose tax liability is “nil” (income of INR 5 lakhs/year or less). Earlier those people who were not subject to income tax also had to pay tax on FDs whose interest amount exceeded INR 10,000. But now they can submit Form 15H to get an exemption.
So, now the senior citizens can avail tax exemption up to INR 50,000 on their fixed deposits under tax amendments.
Company Fixed Deposits- the best bet for senior citizens
From the aforementioned information, it is clear that now senior citizens will have better income from FDs. Unlike earlier, they will not have to pay tax on the interest income, given the conditions are fulfilled.
Among various FD schemes available, company FDs offer maximum benefits for senior citizens. Company FDs such as Bajaj Finance FDs are the hallmark of safety with ICRA’s MAAA/stable rating and CRISIL’s FAAA/Stable rating. Here are some reasons why company FDs are the best bet for senior citizens:
- Higher interest rates– Bajaj Finance is known for its high interest rates on FDs. The senior citizens’ interest rate on Bajaj Finance FD is higher than regular FD interest rates. Senior citizens get an additional 0.35%, and the interest rate can go up to 8.95%, depending on the tenor of investment.
- Tax exemption-One of the major reasons for choosing this investment option is the fixed deposit income tax exemption. As aforementioned, according to the new amendments, senior citizens get a higher tax exemption on income interest from fixed deposits.
Senior citizens with an annual income of INR 5 lakhs or less will be exempted from paying income tax on FDs. Also, senior citizens can avail a tax exemption of up to INR 50,000 on interest earned.
- Flexible tenor– The flexibility to choose tenor lets you stagger your FD investments over a period of time. This feature is highly beneficial for senior citizens as they can plan the maturity timelines as per their future goals.
- Cumulative/non-cumulative fixed deposits-With Bajaj Finance, senior citizens get the option of investing in both, cumulative as well as non-cumulative fixed deposits. If you want regular income, then choose the non-cumulative option or else if you want your interest to be released along with the maturity amount then choose the cumulative option. It is advised to choose the cumulative option as it gives more profit.
Senior citizens can start investing in Bajaj Finance FD with a minimum investment amount of INR 25,000. With new income tax policies, it has become a lucrative investment option.