SBI 5-Year FD vs SCSS: Which investment option can give better returns on Rs 3,00,000?
Compare SBI 5-Year FD and SCSS for a Rs 3,00,000 investment. Learn about interest rates, returns, eligibility and benefits.
SBI 5-Year FD is a fixed deposit offering stable returns over a fixed period, with varying interest rates based on tenure and depositor type. SCSS (Senior Citizens Savings Scheme) is a government-backed savings scheme exclusively for senior citizens, providing higher interest rates and tax-saving benefits. Both options are safe, secure and cater to different investment needs.
SBI 5-Year FD: Interest Rates
SBI offers interest rates ranging between 3.50% to 7.25% p.a. for the general public and 4.00% to 7.75% p.a. for senior citizens. The SBI Tax Saving FD provides a fixed interest rate of 6.50% p.a. for general depositors and 7.50% p.a. for senior citizens.
SBI 5-Year FD: Investment Returns
For an investment of Rs 3,00,000 in an SBI 5-Year FD:
- The total maturity value after 5 years is Rs 4,14,126
- The total interest earned over the tenure is Rs 1,14,126
SCSS: Interest Rates and Payouts
The Senior Citizens Savings Scheme (SCSS) offers a fixed interest rate of 8.2% p.a., effective from January 1, 2024. Interest is payable quarterly on the 1st of April, July, October, and January, ensuring regular income for account holders.
Eligibility for SCSS Account
The SCSS is available for:
- Individuals aged 60 years and above.
- Retired civilian employees aged between 55 and 60 years (investment must be made within 1 month of receiving retirement benefits).
- Retired defense employees aged between 50 and 60 years (investment must be made within 1 month of receiving retirement benefits).
- Accounts can be opened individually or jointly with a spouse.
SCSS Deposit Limits
Deposits must be made in multiples of Rs 1,000, with a minimum deposit of Rs 1,000. The maximum deposit limit across all SCSS accounts held by an individual is Rs 30 lakh. Excess deposits are refunded, and only savings account interest rates apply on the excess amount.
SCSS Tax Benefits and Taxability
- Investments under SCSS qualify for deductions under Section 80C of the Income Tax Act. However:
- Interest is taxable if the total annual interest exceeds Rs 50,000.
- TDS is deducted unless the account holder submits Form 15G or 15H, provided the accrued interest does not exceed the prescribed limit.
SCSS Premature Closure
- Account holders can prematurely close their SCSS account, subject to the following conditions:
- No interest is paid if closed within 1 year, and any prior interest paid is recovered.
- Closure after 1 year but before 2 years attracts a penalty of 1.5% on the principal amount.
- Closure after 2 years but before 5 years attracts a penalty of 1% on the principal amount.
SCSS Account Maturity and Extension
The SCSS account matures after 5 years. Account holders can extend it for an additional 3 years by submitting an application within 1 year of maturity. Extended accounts earn the interest rate prevailing on the date of extension.
SCSS: Investment Returns
For an investment of Rs 3,00,000 in SCSS:
- The total maturity value after 5 years is Rs 4,23,000
- Quarterly payouts of Rs 6,150 ensure regular income
- The total interest earned over the tenure is Rs 1,23,000
Key Takeaways for Investors
SCSS: Higher returns and regular income make it ideal for retirees seeking financial stability.
SBI 5-Year FD: Offers flexibility with tenures and is suitable for a broader audience, especially those not eligible for SCSS.