New Delhi: Bank fixed deposits or FDs continue to be popular investment products not just among senior citizens, but also among the investors who does not want to take risk and rather invest in the traditional method. Many banks including State Bank of India (SBI) offer the facility of opening income tax saving FDs. SBI income tax saving FDs, known as SBI Tax Savings Scheme, 2006, can help you claim deductions for investments up to ₹ 1.5 lakh a year under Section 80C of the Income Tax Act.
All you need to know about SBI income tax savings FDs
1. The minimum deposit in an SBI income tax saving FD is ₹ 1,000 and in multiples thereof whereas the maximum deposit should not exceed ₹ 1,50,000 in a year.
2. For an account in the SBI Tax Savings Scheme, 2006, the minimum tenure is for five years, which can go up to a maximum of 10 years.
3. The rate of interest for the SBI tax saving FDs, is similar to that of fixed deposits.The interest rates for retail domestic term deposits below ₹ 1 crore is 6.85 per cent for general public and 7.35 per cent for senior citizens for 5- 10 years maturity.
4. SBI income tax saving FDs cannot be withdrawn before the expiry of five years from the date of its receipt.
5. A nomination facility is also available with the SBI tax saving FDs.
Other things to know about the tax saving FDs
The interest earned on an income tax saving FD is taxable as per the investor’s tax bracket.
Interest on tax saving deposits is payable on monthly/quarterly basis. This can be reinvested, if the investor wants so.
In the case of joint deposits, the tax benefit under Section 80C will be available only to the first holder of the deposit.