State Bank of India (SBI) 5-Year FD: Investors seeking guaranteed returns from their investments consider fixed deposits (FD) as a reliable option. FDs provide them with interest on maturity, and they also get the principal back. A lot of senior citizens use FD as a retirement scheme, where they invest one-time and get returns in the form of monthly, quarterly, half-yearly, or yearly instalments.
Banks such as State Bank of India (SBI) and NBFCs offer FDs of different durations.
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The most popular of them have 1-year, 2-year, and 5-year durations.
One can also invest in FDs with a five-year duration.
FDs of different durations provide different interest rates.
While rates are higher for short-duration FDs compared to long duration options, a lot of banks offer higher interest rates to senior citizens and super senior citizens than general citizens.
In all the FD options, a 5-year FD stands out since it provides tax benefits under Section 80C of the Income Tax Act, 1961.
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What is SBI 5-year FD?
SBI offers different FDs, of which the most the most popular are the 400-day Amrit Kalash Scheme, 1-year FD, 3-year FD, and 5-year FD.
It provides the highest interest in the Amrit Kalash scheme at 7.10 per cent.
The interest rates in the 1-year, 3-year, and 5-year FDs are 6.80 per cent, 6.75 per cent, and 6.50 per cent, respectively (As per Paisabazaar.com).
We see that the 5-year FD provides the lowest interest rate among all the SBI FD schemes.
But there is a catch here. Anyone who invests money in the 5-year FD will get a tax exemption of up to Rs 1.50 lakh in a financial year under Section 80C.
This is the reason why a 5-year FD is also known as a tax-saving FD.
In the long run, even though one gets a lower interest rate on a 5-year FD, their overall earnings, including tax benefits, can be quite high compared to investments with lower durations of FDs.
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What will Rs 5 lakh investment in 5-year SBI FD give you?
If one makes an FD of Rs five lakh in a 5-year SBI FD, at the rate of 6.50 per cent annual interest, they will get 1,90,210 in interest on maturity.
Along with the principal amount of Rs five lakh, their total maturity amount will be Rs 6,90,210.
If you are not investing in any other scheme that pertains to 80C and gets a full tax exemption of Rs 1.50 lakh, then your investment in the 5-year SBI FD will reward you with Rs 3,40,210.
