FD rate up to 8% for senior citizens: Best 5-year options and key tax rules explained

At a time when interest rates are stabilising, a few banks are continuing to offer high fixed deposit (FD) returns for senior citizens. Some banks are paying interest rates of up to 8% on five-year FDs for people aged 60 years and above, with investments capped at ₹3 crore.

Among the top offers, Suryoday Small Finance Bank is currently offering an 8% interest rate on five-year fixed deposits for senior citizens. Meanwhile, Jana Small Finance Bank is offering a slightly lower but still attractive 7.77% interest rate for the same tenure.

However, experts advise caution while investing in small finance banks. Although deposits are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to ₹5 lakh, investors are encouraged to keep their FD exposure within this limit to stay protected in case of unforeseen issues.

When is TDS deducted on FD interest?

Banks deduct TDS (Tax Deducted at Source) if a senior citizen earns more than ₹1 lakh in FD interest in a year from a single bank. This deduction happens even if the person’s total income is not taxable.

For FY 2025–26, senior citizens earning up to ₹12 lakh under the new tax regime do not have to pay income tax due to the Section 87A rebate. Still, banks will deduct TDS unless the investor submits Form 15H.

By submitting Form 15H, eligible senior citizens can inform banks that their total tax liability is zero and avoid unnecessary TDS. If TDS is already deducted, it can be claimed back as a refund while filing the income tax return (ITR).