According to analysts at SBI, the biggest lender in the nation, the government collected more than Rs 27,000 crore in taxes from older persons based on the interest they received on term deposits during the previous fiscal year.
The entire amount of deposits increased by 143% in the previous five years, from Rs 14 lakh crore to Rs 34 lakh crore at the end of FY24, according to a report by SBI researchers.
The overall number of term deposit accounts increased by 81% to 7.4 crore during the same period, according to the research, suggesting that high interest rates may have contributed to older residents' increased interest in investing in fixed deposits.
According to SBI analysts, at least 7.3 crore of these accounts have balances over Rs 15 lakh. Assuming that the deposits generate an interest rate of 7.5 percent, seniors would have earned Rs 2.7 lakh crore in interest alone in FY24.
Furthermore, as per the report, this comprises the remaining amount from the Senior Citizen Savings Scheme and Rs 2.57 lakh crore from bank deposits.
"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 paper stated.
According to the statement, the proportion of incremental term deposits held by senior individuals has increased from 15% to 30% during the past five years.
"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 research stated.
It further stated that the government's decision to raise the TDS (tax deducted at source) threshold on deposits for older persons to Rs 50,000 is helping to encourage more seniors to make deposits.
As a consequence of the banking system's aggressive deposit-attracting tactics in the face of volatile liquidity constraints—which the RBI has been maintaining since February 2023—the deposit rate was raised in the second half of FY24, according to the study.
The tendency to capitalize on interest rate differences between core and term deposits has been the "palpable shift" in depositor behavior, according to SBI economists. In FY24, the incremental share of term deposits increased to 93%, while the share of low-cost current and savings accounts decreased to 7%.
