SBI has initiated a trend where everyone is rushing to create tax-saving plans at the beginning of each financial year, especially among the salaried class. There are several options available for tax savings.
Among them, bank FDs, small savings schemes from the post office, and ELSS are some popular options among salaried employees, offering not only tax savings on investments but also building a good corpus for maturity. Today, let’s talk about bank FDs.
This is a product where not only do you get good interest for depositing for 5 years, but you also get the benefit of up to Rs. 1.5 lakh tax deduction. Here, we’ll understand the earnings and tax savings on depositing Rs. 5 lakh for 5 years in the country’s largest bank, SBI.
Regular customers in SBI are getting an annual interest rate of 6.5% on a 5-year term deposit (SBI FD interest rate 2024). If a customer has deposited Rs. 5 lakh for 5 years, the maturity amount will be Rs. 6,90,209. This way, you’ll earn Rs. 1,90,209 through interest.
SBI: How much tax will be saved?
For SBI or any bank, under section 80C, a claim of up to Rs. 1.5 lakh tax deduction can be made on depositing for 5 years in a term deposit. However, note that tax benefits under 80C can only be availed of in the old tax regime. However, also note that interest on FDs is taxed.
According to income tax rules, if the interest earned on FD/TD in a financial year is more than Rs. 40,000, TDS (Tax Deducted at Source) is deducted. For senior citizens, this limit is Rs. 50,000. If a person’s income is below the taxable limit, they will have to fill out Form 15G and 15H and request the bank not to deduct TDS on FD/TD.
Form 15G is for individuals below 60 years of age. The tax exemption limit for taxpayers up to 60 years of age is Rs. 2.5 lakh. Similarly, Form 15H is for individuals aged 60 and above. The tax exemption limit for senior citizens is Rs. 3 lakh. If a taxpayer is a super senior citizen, i.e., above 80 years, their income up to Rs. 5 lakh is outside the income tax bracket. However, even super senior citizens need to fill out Form 15H and inform the bank.
Bank FD: A Good Option for Guaranteed Income
Bank fixed deposits (FDs) are a scheme where investors can earn a guaranteed income without taking market risks. Investors are provided with information about the interest rates at the time of deposit, making it a good option to create a fixed amount within a certain period. Banks periodically review and adjust the interest rates of various maturity periods.