New Delhi: Recurring deposits (RDs), like fixed deposits (FDs), offers interest rates based on tenure and your age. If you are a senior citizen, the interest rate is usually higher. The interest rate on an FD and an RD is similar. State Bank of India (SBI) recurring deposit has terms period ranging from 12 months to 120 months. SBI RD interest rates vary between 6.70% and 6.85% for regular customers and an additional interest rate hike of 0.50 percentage points for senior citizens. For instance, SBI’s 1-year recurring deposit will fetch you 6.8% interest rate. For the same period, a senior citizen will earn at the rate of 7.30% per annum.
A look at the key features of an SBI RD account
1. SBI offers two types of recurring deposits, the SBI Regular Recurring Deposits and SBI Holiday Savings Account. The SBI Regular Recurring Deposit is the most common and preferred recurring deposit account offered by SBI. The SBI Holiday Savings Account was formed when SBI joined hands with travel advisory company Thomas Cook. In this account, customers can deposit a certain amount every month with the SBI with an intention to avail a vacation that is listed among the Holiday Savings Account packages on the Thomas Cook website.
2. SBI RD account can be started with a minimum monthly deposits of ₹ 100 and in multiples of ₹ 10. However, there is no maximum limit.
3. SBI recurring deposits comes with terms ranging from 12 months to 120 months.
4. Nomination facility is available for an SBI RD account.
5. State Bank of India allows its customers to withdraw their RD money prematurely. If the customer withdraws RD money before it matures, the bank will charge a nominal penalty.
6. For medium-term tenure (3-5 years), the rate of return offered by SBI is 6.80% for general citizens and 7.50% for senior citizens. For the term period of 1-2 years, the rate of return is 6.8% for general citizens and 7.3% for senior citizens. For long-term tenure investments (5-10 years), the rate of return is 6.85%.
7. For senior citizens, State Bank of India’s rate of return is 0.50 percentage points more than that for regular citizens. For a medium term tenure, the rate of interest for the recurring deposit scheme is 7.3% and for a long term tenure it is 7.35%.
8. On maturity, the depositor is paid as a lump-sum amount, which includes the periodic investments and the interest income earned on them.
9. Recurring deposit interest rates, once determined, do not change during the tenure of the deposit.
10. The money you deposit in an SBI recurring deposit account is taxable under the Income Tax Act, 1961. The amount invested will be mentioned in your TDS (tax deducted at source) form. A 10% tax is applicable on the interest you have earned if you have gained more than ₹ 10,000 in one year.
SBI also offers the SBI Flexi Deposit Scheme, which is similar to a recurring deposit. In the SBI Flexi Deposit Scheme, instead of paying one fixed amount every month, the account holder can change the deposit amount every month. The minimum deposit amount should be ₹ 5,000 in one financial year and the maximum deposit amount can go up to ₹ 50,000 p.a. The minimum tenure of this deposit scheme is 5 years and the maximum tenure is 7 years.