Senior citizens looking for higher returns on their fixed deposits (FDs) can still earn up to 8.5% interest on three-year tenures, as several small finance banks continue to offer elevated rates. However, investors should be aware of tax implications like TDS and how to avoid it using Form 15H.As per data from Paisabazaar.com, as reported ET (as of July 16, 2025), here are the top FD interest rates for senior citizens for deposits up to Rs 3 crore:
| Bank Name | Interest Rate (3-year FD) |
| Utkarsh Small Finance Bank | 8.5% |
| Jana Small Finance Bank | 8.25% |
| slice Small Finance Bank | 8.25% |
| Suryoday Small Finance Bank | 8.15% |
While these rates are attractive, experts advise caution. Deposits in small finance banks are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) only up to Rs 5 lakh. Given the unique risk profile of such banks, investors are advised to limit exposure to the DICGC-insured threshold to ensure principal and interest protection in case of unforeseen events.
When is TDS deducted from FDs?
Banks are required to deduct tax deducted at source (TDS) when the interest income from a senior citizen’s FD crosses Rs 1 lakh in a financial year. It’s important to note that TDS isn’t an additional tax—it’s adjusted against your total tax liability and can be claimed as a refund while filing your income tax return (ITR).Under the new tax regime for FY 2025–26, senior citizens with income up to Rs 12 lakh are eligible for the Section 87A rebate and do not have to pay income tax. However, despite this, banks still deduct TDS if the interest crosses the Rs 1 lakh threshold because they are not privy to your tax status.To prevent TDS deduction, senior citizens can submit Form 15H, declaring that their total income (after deductions and rebate) is below the taxable limit. For FY 2025–26, this limit is Rs 12 lakh under the new tax regime and Rs 5 lakh under the old tax regime.(Disclaimer: The opinions, analyses and recommendations expressed herein are those of brokerage and do not reflect the views of The Times of India. Always consult with a qualified investment advisor or financial planner before making any investment decisions.)
