52887In view of reduced inflation and expenses, will it be right to invest in IT stocks?

We invest from early in our lives to accumulate a good amount of wealth by the evening of life. As our retirement age comes closer, we move our investments from risky products to the safer ones. Most senior citizens prefer to invest in fixed deposits after retirement with a monthly or quarterly pay-out option. If you are looking for best interest rates on senior citizen fixed deposits, here is a list complied in association with Bankbazaar.com.

Data from Bankbazaar.com shows IndusInd Bank is offering the highest interest rate – among listed public and private sector banks- on three-year term deposits for senior citizens at 7%. Second comes Bandhan Bank offering 6%. Axis Bank and State Bank of India are close-second at 5.90% and 5.80%, respectively.

Parking money in fixed deposits is the easiest and safest way to earn regular income post-retirement. But at a time when interest rates are at multi-year low, you should consider the inflation and tax aspect of it.

Focus on positive real rates

The inflation is hovering around 6% per annum for the last couple of months. For a positive real rate, you need an investment option giving more than 6% returns. That said, you may park a larger portion of your retirement corpus in fixed deposits or senior citizen and other postal schemes while some part of it can go into equity or hybrid funds to earn overall decent returns.

Know the tax rules

The interest earned on your fixed deposits is taxable. If your bank estimates more than Rs 50,000 annual interest amount on your senior citizen FD, it will deduct tax deducted at source (TDS) at 10%. If your total annual income in a year is less than Rs 5 lakh, you are not liable to pay tax. You can submit Form H in the beginning of the year to avoid TDS deduction. If TDS has been deducted already, you should file ITR (income tax return) to get a refund on it.

Remember that this year onwards the TDS will be deducted at double the rate if you had not filed the ITR for the last two years.

Senior citizens may also seek tax exemption on interest amount earned up to Rs 50,000 in a year. If their taxable income crosses Rs 5 lakh, the interest amount will be taxed as per the slab rate.