Senior Citizen Savings Scheme, Fixed Deposits in Post Office and banks just got more attractive; here's why

Senior Citizen Savings Scheme (SCSS) and Fixed Deposits by senior citizens in post-office and banks are set to become more attractive as the government has doubled the TDS thresholds in Budget 2025.

The enhanced TDS thresholds on senior citizen deposits will apply from Financial Year 2025-26, starting from April 1, 2025.

"This would avoid blockage of funds in the form of interest income for senior citizens who generally prefer to save their money in fixed deposits. This would definitely make FDs more attractive for senior citizens and thereby would avoid the hassle of filing returns for senior citizens (having only income from FD interest up to ₹100,000) to claim tax refunds on account of TDS on interest income," says CA Dr Suresh Surana.

As per the budget documents, there will be no Tax Deducted at Source (TDS) on interest income from deposits made by senior citizens if it is below ₹1 lakh in a financial year. This will apply to all deposits by senior citizens in banks, post office and banks run by cooperative societies.

SCSS and fixed deposit schemes offered by banks and post offices are very popular among senior citizens.

As per the Budget 2025 proposal, TDS on interest from deposits by senior citizens will not be deducted if the annual interest income is below ₹1 lakh.

TDS can be claimed back

TDS can be claimed back by filing Income-tax Return (ITR) if the annual income is below the taxable limit.

Under existing rules, income up to ₹7 lakh is tax free under the new tax regime and up to ₹5 lakh is tax-free under the old tax regime. From FY 2025-26, income up to ₹12 lakh will be tax-free in the new regime while there will be no change in the old regime.