To control inflation, Central banks throughout the world are raising interest rates. Also, this year, the Reserve Bank (RBI) has raised the repo rate by 2.25%, which is 225 basis points. As a result, banks frequently increase the cost of loans.
Additionally, they are raising deposit rates to draw in more and more deposits. The interest rates on deposits with various maturities have increased by up to 65 basis points as of December 13, 2022, according to SBI, the largest bank in the nation. Regular customers receive an annual interest rate of 6.25 percent, while seniors receive an interest rate of 7.25 percent on 5-year FDs.
SBI: Amount of Income in 5 years on ₹ 5 lakh deposit
A normal customer will receive around Rs 6.82 lakh at maturity if they make an FD of Rs 5 lakh in SBI's bank for five years at an interest rate of 6.10% per annum, according to the FD Calculator. That is, a fixed income from the interest of Rs. 1.82 lakh will be available.
On the other side, senior citizens who purchase a 5-year fixed-rate deposit for Rs. 5 lakh will receive more than Rs. 7.16 lakh when it matures. This means that in 5 years, a fixed income of more than Rs 2.16 lakh will be available as interest. SBI's updated interest rates will apply to accounts under Rs 2 crore on June 13, 2022. On the other side, SBI employees will receive 1% extra interest on deposits made simultaneously.
Senior citizens get more benefits in the SBI Wecare scheme.
Retail term deposits with a tenure of "5 years or more" are eligible for an additional 0.30 percent interest rate under the SBI Wecare Deposit Scheme for senior persons. The bank already offers older citizens 0.50% more interest than it does other consumers. This way, city residents receive 0.80% more interest on their investments under this program.
In addition, in May 2020, the SBI introduced the "SBI WeCare Deposit" for its older residents during the Corona pandemic lockdown.
Section 80C: Tax deduction up to Rs 1.5 lakh
Bank fixed and term deposits are considered secure. Risk-averse investors should consider this alternative. A 5-year tax-saving FD qualifies for a tax deduction of up to Rs 1.50 lakh under Section 80C.
On the other hand, FD interest is taxable. Due to tax savings and fixed income, bank FDs are a very well-liked investment option among salaried and senior citizens. By submitting Forms 15G and 15H, you can avoid paying taxes on FD if your income is outside the tax net.