State Bank of India Tax Saving Fixed Deposit
Updated on: Sep 4th, 2023
The State Bank of India (SBI), one of India's most trusted banking institutions, offers a unique Fixed Deposit scheme designed for tax savings. The "SBI Tax Saving Scheme" combines the safety and reliability of traditional FDs with the added advantage of tax benefits. Investors can earn attractive interest on their deposits and enjoy exemptions under Section 80C of the Income Tax Act.
Catered towards individuals seeking smart ways to reduce their taxable income while ensuring their money grows, this FD by SBI proves to be an enticing blend of savings and tax efficiency. Let's delve deeper into its features.
Features of the Tax-saving FDs
The interest earned on all types of FDs is included in the total income and is taxable per the prevailing slab rate.
- As per section 80C of the Income-tax Act 1961, the investor gets an exemption of ₹1,50,000 in tax saver FD investment.
- For a senior citizen (Aged above 60 years), a deduction of up to ₹50,000 is available; for non-senior citizens, up to ₹40,000.
- If the PAN is not provided, then, in that case, 20% TDS is levied.
- In case your total income is below the taxable limit, i.e. Rs. 2.5 lakhs, you can avoid TDS by submitting Form 15G to the bank.
- For senior citizens, if your total income is below the taxable limit, you can avoid TDS by submitting Form 15H to the bank.
Now let’s take a look at the features a little bit in-depth:
- Duration: Tax Saving FDs usually come with a 5-year lock-in period, prohibiting any withdrawals during this time.
- Interest Offerings: Competitive interest rates are a highlight, and institutions like Federal Bank often provide an additional rate increment for senior citizens.
- Borrowing against FD: Given their fixed tenure, these FDs typically can't be used as loan collateral.
- Interest Disbursement: Different payout options, such as monthly, quarterly, or annual intervals, might be available. Some banks also provide reinvestment of the earned interest.
- Renewal Policy: Unless instructed otherwise, these FDs can be automatically renewed upon maturity for an equivalent period at the current interest rate.
- Early Withdrawal Charges: Withdrawals before the end of the lock-in period aren't permissible. Withdrawing after the lock-in but before FD maturity might invite penalties.
- Investment Limits: While there's a minimum deposit requirement to start a tax-saving FD, the upper limit typically remains INR 1.5 lakh annually, aligning with the 80C guidelines.
- Tax Deduction at Source (TDS): TDS might be deducted if the interest income surpasses a specified limit.
Eligibility Criteria for Opening a Tax-Saver FD
- Resident Individuals: Any individual who is a resident of India can open a Tax-saving FD with Axis Bank.
- Hindu Undivided Families (HUF): The Karta of the HUF can open a Tax-saving FD on behalf of the family.
- Minors: Minors can open an FD through a guardian.
- Single or Joint Accounts: Both single and joint accounts can be opened. However, the tax benefit under section 80C is usually available only to the first account holder for joint accounts.
- Existing State Bank of India Customers: Existing customers may find it easier to open a Tax-saving FD, especially online, given that their KYC details are already available with the bank. New customers might need to go through the full KYC process.
- Amount: The minimum amount for investment typically starts from a small amount (e.g., ₹100) but can go up to a maximum of ₹1.5 lakhs in a financial year to avail of the 80C benefit.
Documents required for State Bank of India FD account
If you are not a prior customer or account holder in Axis Bank, here are some documents you must submit.
For Identity Proof and Signature Proof
- PAN Card
- Driving License
- Voter’s ID
- Aadhar Card
For Address proof
- PAN Card
- Driving License
- Voter’s ID
- Aadhar Card
- Utility Bill
- Bank account Passbook (Updated and should not be more than 3 months old)
What is the maximum and minimum amount I can deposit in a Tax-saving FD?
Typically, you can start with a minimum amount, such as ₹100. The maximum amount that qualifies for a deduction under Section 80C is ₹1.5 lakhs in a financial year.
Do senior citizens get an extra interest rate on Tax-saving FDs?
Senior citizens are generally offered a higher interest rate than regular deposit rates.
Is the interest earned on Tax-saving FDs tax-free?
No, the interest earned on Tax-saving FDs is taxable. Only the principal amount you deposit is eligible for a tax deduction under Section 80C.
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