What is Tax Saver FD in SBI Bank?
Tax Saver FD in SBI Bank refers to a fixed deposit scheme offered by the State Bank of India that provides individuals with an opportunity to save money and enjoy tax benefits under Section 80C of the Income Tax Act, 1961.
It is a specially designed financial product that encourages long-term savings while offering tax deductions on the invested amount.
Under this scheme, individuals can open a fixed deposit account with SBI Bank for a lock-in period of five years. The funds deposited in the Tax Saver FD cannot be withdrawn before the completion of this lock-in period, except in the case of the depositor’s death.
The maximum amount eligible for tax deduction under Section 80C is up to Rs. 1.5 lakh per financial year.
Features & Benefits
Here is a table summarizing the features and benefits of the Tax Saver FD in SBI Bank:
| Features | Benefits |
|---|---|
| Eligibility | Available to individual residents, Hindu Undivided Families (HUFs), and senior citizens. |
| Lock-in Period | Mandatory lock-in period of 5 years. Premature withdrawals or partial withdrawals are not allowed, except in the case of the depositor’s death. |
| Tax Benefits | Investment in Tax Saver FD is eligible for tax deduction under Section 80C of the Income Tax Act, 1961. The maximum deduction allowed is up to Rs. 1.5 lakh per financial year. |
| Interest Rate | Competitive interest rates are offered on Tax Saver FDs. The rates may vary from time to time and are subject to SBI Bank’s policies. |
| Interest Payment | The interest is typically compounded quarterly and credited to the FD account at maturity. However, the interest payment frequency may vary, and you can choose to receive the interest monthly or quarterly as per your preference. |
| Renewal Options | Upon maturity, you can choose to renew the Tax Saver FD for an additional period or opt for automatic renewal as per the prevailing rules and regulations of SBI Bank. |
| Loan Against FD | You can avail a loan against your Tax Saver FD, subject to certain terms and conditions specified by SBI Bank. |
| Nomination Facility | SBI Bank provides the option to nominate a beneficiary for your Tax Saver FD. In case of the depositor’s death, the nominee can claim the deposit and accrued interest. |
| Online Banking Access | SBI Bank offers online banking facilities, allowing you to access your Tax Saver FD account and perform various transactions conveniently. |
| Safety and Security | SBI Bank is a reputable and well-established bank in India, providing assurance of the safety and security of your funds. The deposits are insured up to Rs. 5 lakh per depositor under the Deposit Insurance and Credit Guarantee Corporation (DICGC) guidelines of the Reserve Bank of India (RBI). |
Interest Rate
The interest rates for the Tax Saver FD in SBI Bank are subject to change and can vary based on market conditions and SBI Bank’s policies.
Therefore, it is advisable to check the below official SBI Bank link or contact the bank directly to obtain the current interest rates for the Tax Saver FD.
https://sbi.co.in/web/personal-banking/investments-deposits/deposits/sbi-tax-savings-scheme-2006
SBI Bank typically offers competitive interest rates on their fixed deposit products, including the Tax Saver FD. The interest rates may vary for different tenures and investment amounts.
Additionally, SBI Bank may offer preferential rates for senior citizens or other eligible categories.
To get accurate and up-to-date information on the interest rates for the Tax Saver FD in SBI Bank,
it is recommended to visit the bank’s official website, check their product brochures, or contact SBI Bank’s customer service or branch personnel.
They will be able to provide you with the most current information regarding interest rates and any associated terms and conditions.
Tax Saver FD for Senior Citizen
In the regular Tax Saver FD scheme, senior citizens would be subject to the same terms, conditions,
and benefits as any other individual opening a Tax Saver FD account with SBI Bank.
The scheme provides tax benefits under Section 80C of the Income Tax Act, 1961, allowing individuals
to claim deductions on the invested amount.
Disadvantages
| Disadvantages | Explanation |
|---|---|
| Lock-in Period | The Tax Saver FD has a mandatory lock-in period of 5 years, meaning you cannot withdraw the funds before the completion of this period, except in the event of the depositor's death. This lack of liquidity can be a disadvantage if you require access to your funds for unforeseen expenses or emergencies during the lock-in period. |
| Premature Withdrawal Penalty | Premature withdrawals or partial withdrawals from the Tax Saver FD are generally not allowed until the lock-in period is completed. If you withdraw the funds before the maturity date, SBI Bank may impose a penalty or reduce the interest rate payable on the FD. This can result in a loss of potential returns and is a disadvantage if you need to access your funds before the completion of the lock-in period. |
| Limited Investment Window | The Tax Saver FD allows individuals to invest a maximum of Rs. 1.5 lakh per financial year to claim tax benefits under Section 80C. While this is a significant amount, it may limit your investment options if you have additional funds to invest for tax-saving purposes. You may need to explore other investment avenues to maximize your tax benefits if you wish to invest more than the permissible limit. |
| Fixed Interest Rate | When you open a Tax Saver FD, the interest rate applicable at the time of investment remains fixed for the entire tenure. This means you may miss out on higher interest rates if market conditions improve or SBI Bank revises its rates during the lock-in period. However, it's important to note that fixed interest rates can also provide stability and predictability. |
| No Option to Modify Investment during Lock-in Period | Once you have invested in the Tax Saver FD, you cannot modify the investment amount or add additional funds to the same FD during the lock-in period. If you want to invest more or modify your investment strategy, you would need to open a new Tax Saver FD or explore other investment options outside of the Tax Saver FD scheme. |
TDS on Tax Saver FD
Tax Deducted at Source (TDS) is applicable to the interest earned on Tax Saver FDs in SBI Bank. Here are the key points regarding TDS on Tax Saver FDs:
- Threshold Limit:
TDS is applicable on the interest earned on the Tax Saver FD if it exceeds Rs. 40,000 for regular individuals and Rs. 50,000 for senior citizens in a financial year. - TDS Rate:
The TDS rate for Tax Saver FDs is 10% if your PAN (Permanent Account Number) is provided to the bank. If your PAN is not available or not provided, the TDS rate is 20%. - Form 15G/15H:
If your total income is below the taxable limit and you want to avoid TDS deduction, you can submit Form 15G (for individuals) or Form 15H (for senior citizens) to declare that you are not liable to pay income tax. - TDS Certificate:
SBI Bank will issue a TDS certificate (Form 16A) to you, reflecting the amount of TDS deducted during the financial year. - Income Tax Returns:
The interest earned on the Tax Saver FD is taxable income and should be declared in your income tax returns. You can claim a credit for the TDS deducted while calculating your final tax liability.
It's essential to note that tax laws and rates may change over time, so it's advisable to refer to the official SBI Bank website or consult with a tax professional for the most up-to-date and accurate information regarding TDS on Tax Saver FDs and your specific tax obligations.
FAQs
- Can I open multiple Tax Saver FDs?
Yes, you can open multiple Tax Saver FDs with different banks or even with the same bank, as long as the total investment in all Tax Saver FDs does not exceed the maximum limit eligible for tax deduction under Section 80C.
- Can I nominate a beneficiary for my Tax Saver FD?
Yes, you can nominate a beneficiary for your Tax Saver FD. In the event of the depositor's death, the nominee can claim the deposit and accrued interest.
- Can I take a loan against a Tax Saver FD?
Yes, some banks may allow you to take a loan against a Tax Saver FD, subject to certain terms and conditions specified by the bank.
- What happens at the end of the lock-in period?
At the end of the lock-in period, you have the option to renew the Tax Saver FD for an additional period or choose automatic renewal as per the prevailing rules of the bank.
- Are premature withdrawals allowed from a Tax Saver FD?
Premature withdrawals or partial withdrawals from a Tax Saver FD are generally not allowed until the completion of the lock-in period. However, in the event of the depositor's death, premature withdrawals may be permitted.
- How much tax deduction is available under Section 80C for a Tax Saver FD?
The maximum tax deduction available under Section 80C is up to Rs. 1.5 lakh per financial year.