Several important announcements were made in the budget on February 1. Among them, Finance Minister Nirmala Sitharaman revealed a significant update for senior citizens. She stated that the TDS exemption on interest income for the elderly will be increased in the upcoming financial year.

 

This change makes investment options like Fixed Deposits and the Senior Citizen Savings Scheme (SCSS) much more advantageous for older individuals. If you’re considering investing in an FD, it’s a great idea to do so in the name of a senior family member starting from the new financial year, as this can lead to greater earnings. Here’s how it works.

 

Seniors view FD as a trustworthy investment option

 

Many elderly individuals in the country regard Fixed Deposits as a safe investment choice and prefer to avoid any risks with their retirement savings. As a result, they often choose FDs to secure their funds. Recognizing this, the government has expanded the tax exemption limits for FDs.

 

Current TDS limits explained

Previously, if a senior citizen’s annual income from FD interest exceeded Rs 50,000, TDS would be applied. However, starting in the new financial year, this threshold will rise to Rs 1,00,000. This means that if they earn up to Rs 1,00,000 in interest from options like FDs or SCSS, no TDS will be deducted.

 

Here’s how you can benefit

While the TDS exemption limit for senior citizens has been increased, the limit for others remains at Rs 40,000. Therefore, if you open an FD in the name of an elderly family member instead of your own name in the new financial year, you can take advantage of the exemption on the interest earned.

 

Let’s illustrate with an example

Imagine you invest Rs 3,00,000 in a 3-year FD under your name at an interest rate of 7%. This would yield Rs 69,432 in interest. Since the TDS limit for regular individuals is Rs 40,000, TDS would be deducted from the total interest earned. Conversely, if you invest the same amount in the name of a senior citizen, you can avoid that deduction.

 

So, up until now, if senior citizens made more than Rs 50,000 a year from interest on fixed deposits, TDS would be taken out. But starting from the new financial year, that limit is going up to Rs 1,00,000. This means they can earn up to Rs 1,00,000 in interest from things like fixed deposits and SCSS without having TDS deducted.

 

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