Investing in the stock market entails inherent risks, and not every investor is equipped to weather the volatility. For those seeking a secure and steady source of fixed income, Bank Fixed Deposits (Bank FDs) emerge as a robust and perennial option. One of the standout features of this deposit scheme is that senior citizens enjoy enhanced interest rates compared to regular customers across various maturity schemes. The State Bank of India (SBI), the country's largest public lender, offers a spectrum of FD options ranging from 7 days to 10 years.
Suppose an investor, whether a regular customer or a senior citizen, opts to deposit Rs 10 lakh in a lump sum in SBI's 10-year maturity scheme. According to the SBI FD Calculator, a regular customer would receive a total of Rs 19,05,558 on maturity at a 6.5 per cent annual interest rate, yielding a fixed income of Rs 905,558 from interest.
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In contrast, a senior citizen investing the same amount in the 10-year maturity scheme would enjoy a higher interest rate of 7.5 per cent. The SBI FD Calculator estimates that the senior citizen would receive a total of Rs 21,02,349 on maturity, reflecting the advantage of additional interest income for senior citizens.
It is crucial to note that interest income from fixed deposits or term deposits is subject to taxation. As per Income Tax Rules (IT Rules), Tax Deduction at Source (TDS) is applicable on FD schemes, implying that the amount received on maturity is considered income and is taxable according to the applicable slab rate. To mitigate tax deduction, depositors have the option to submit Form 15G/15H.
Additionally, customers can leverage tax benefits by claiming deductions of up to Rs 1.5 lakh under Section 80C on a 5-year tax-saving FD.
In summary, the State Bank of India's Fixed Deposit schemes not only provide a secure haven for investors seeking fixed income but also offer preferential rates to senior citizens. While taxation remains a consideration, the potential for stable returns and tax-saving avenues enhances the appeal of SBI Fixed Deposits for those prioritizing financial stability and predictable income streams.
