Many banks, including State Bank of India (SBI), offer the facility of opening income tax-saving fixed deposits or FDs. Under current income tax laws, investment in income tax-saving FDs can help you claim deductions for investments up to Rs 1.5 lakh a year under Section 80C of the Income Tax Act. The amount invested in these tax-saving fixed deposits is deducted from your gross total income for calculating taxable income. For those with access to SBI's internet banking facility - through onlinesbi.com, India's largest bank also offers an online facility for opening income tax-saving fixed deposits or FDs.
All you need to know about State Bank of India (SBI) tax-saving fixed deposits (FDs)
1) According to SBI's website, the minimum amount required to open income-tax saving fixed deposit is Rs 1,000. The maximum deposit should not exceed Rs 1.5 lakh a year.
2) The minimum tenure of SBI tax-saving deposit is five years and maximum is 10 years, according to the bank's website.
3) Rate of interest on State Bank of India (SBI) income tax-saving fixed deposits: According to the bank, the interest rates applicable on income tax-saving fixed deposits are the same as normal fixed deposits. SBI currently pays an interest rate of 6 per cent on normal fixed deposits or term deposits for maturity between 5 years and 10 years. Senior citizens get higher interest rate of 6.50 per cent.
4) SBI on its website says no premature withdrawal facility available on income tax-saving fixed deposit before five years.
5) Nomination facility is available in State Bank of India income tax-saving fixed deposits.
Other things to know about tax-saving fixed deposits
7) Remember that interest earned is income tax saving FDs is taxable as per the investor's tax bracket.
8) TDS or tax deducted at source is applicable on interest earned. TDS becomes applicable when interest payable or reinvested on fixed deposits across all branches, per customer, exceed Rs.10,000 in a financial year.
9) Interest on income tax-saving deposits is payable on monthly/quarterly basis. They can be reinvested, if the investor wants so.
10) In the case of joint deposits, the tax benefit under Section 80C will be available only to the first holder of the deposit.