Senior citizen fixed deposits: Govt likely collected Rs 27,000 crore in taxes on interest earned from FDs, says SBI report

The government has likely mopped up over Rs 27,000 crore in taxes from senior citizens on the interest they earned on term deposits last fiscal, researchers at the country’s largest lender SBI said.

According to the report by SBI researchers, the total amount of deposits has risen by 143 per cent in the last five years to Rs 34 lakh crore at the end of FY24 from Rs 14 lakh crore.


High-interest rates also seem to have led to higher interest among the senior citizens to invest in fixed deposits, as the total number of term deposit accounts grew 81 per cent to 7.4 crore in the same time period, the report said.

SBI researchers estimated that at least 7.3 crore of these accounts have a balance of over Rs 15 lakh, and assuming that the deposits fetch an interest of 7.5 per cent, senior citizens have earned Rs 2.7 lakh crore in FY24 as interest alone.

This includes Rs 2.57 lakh crore from the bank deposits and the remaining from the Senior Citizen Saving Scheme, the report said.

“By assuming 10 per cent (average) tax paid by the senior citizens harmonised across cohorts, the tax mop-up by Government of India would come around Rs 27,106 crore,” the report said.

Senior citizens’ share in the incremental term deposits has gone up to 30 per cent now from 15 per cent five years earlier, it said.

“The increase in deposit rates, the higher interest rate differential for senior citizens and the special deposit schemes for senior citizens have all propelled a tectonic shift in deposit accretion for senior citizens,” the report said.

The government’s move to hike the threshold of TDS (tax deducted at source) on deposits for senior citizens to Rs 50,000 is working as an additional fillip for deposit mobilisation for senior citizens, it added.

The report said some banks have been aggressive in wooing deposits amid the fluctuating liquidity constraints, which has resulted in the banking system raising the deposit rate in the latter half of FY24 despite the RBI holding the rate since February 2023.

The “palpable shift” in depositors’ behaviour has been the inclination to capitalise on interest rate differentials between core and term deposits, with the incremental share of term deposits increasing to 93 per cent and that of the low-cost current and saving accounts declining to 7 per cent in FY24, the SBI economists estimated.

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