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Business News/ Money / Personal Finance/  What is SBI annuity deposit scheme? Should you invest in it?
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What is SBI annuity deposit scheme? Should you invest in it?

Depositors who are looking for a regular flow of income over a period of time can opt for SBI annuity deposit scheme by making one-time deposit

The period of deposit is 36 months, 60 months, 84 months and 120 months Premium
The period of deposit is 36 months, 60 months, 84 months and 120 months

If you have a lumpsum money to keep aside and are eyeing a regular stream of income over a pre-defined period of time, say three or five years — then you can explore the option of SBI annuity deposit scheme'.

This is a scheme that enables investors to deposit one-time sum as lumpsum and receive re-payment of the same in monthly annuity instalment comprising part of the principal amount plus interest.

The monthly annuities are not part of tax-free income. The payment of interest will be subject to TDS (tax deducted at source). The payment of interest will be rounded off to the lowest rupee value.

Minimum deposit

The minimum deposit amount for annuity deposit is based on minimum monthly annuity Rs 1,000 for the relevant period. For example, for three years, minimum deposit amount will be Rs 36,000.

In case you want to close the account prematurely, you can do so by visiting the SBI branch. The closure of account is not permitted through online.

How does it work?

The scheme allows depositors to make one deposit at the outset. This is returned to depositor in form of regular payments over a period of time.

In other words, the principal amount clubbed with interest on reducing principal is paid in instalments over a period of time.

The time period could range between 3 years to 10 years. Different time period options that depositors have are 36 months (three years), 60 months (five years), 84 (seven years) months and 120 months (10 years).

Let us take an illustration to understand this. Suppose you want a monthly annuity of Rs 5,000 (plus interest) for the next 3 years, then you need to deposit Rs 1,80,000 (5,000 X 12 X 3) at the start of three years with SBI annuity deposit scheme.

Difference with other forms of deposits

This is different from other forms of deposits such as fixed deposit (FD) and recurring deposit (RD). In case of FD, a depositor makes a deposit of a particular amount and becomes entitled to receive a higher amount (deposit along with interest) at the end of the maturity period.

At the same time, when a depositor makes deposits on a recurring basis, say Rs 5,000 every month, the accumulated amount (along with interest) is paid back to the depositor at the end of the tenure. This is known as a recurring deposit.

In case of annuity deposit, on the other hand, one large sum is deposited and the returns are staggered over a long period.

To sum up, SBI annuity deposit scheme enables depositors to receive monthly annuities by depositing one-time sum at the start of a tenure. The amount is transferred along with interest.

 

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On tax saving FD, you can save tax up to Rs 1.5 lakh in a year.
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On tax saving FD, you can save tax up to Rs 1.5 lakh in a year.

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Published: 01 Aug 2023, 09:53 AM IST
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