In a usual case you pay tax on interest earned on any of the investment and so to meet the issue SBI has come up with an investment scheme wherein you can invest only a small amount and avoid taxes on the interest pay-outs. And this tax saving investment scheme by the largest state-run lender is suitable even for those with low-budgets. So, via the scheme, investors can save big on taxes.
On its twitter handle, the bank said, "Tax deduction on deposits up to INR 150,000! Grab the opportunity to invest in the SBI Tax Saving Scheme today. For more information, visit."
Eligibility: The scheme can be invested in by a resident Indian in the capacity of an individual.
Karta of an Hindu undivided family (HUF) can also invest in the scheme.
Herein you need to mandatorily be having PAN or permanent account number to invest in the scheme.
Minimum and maximum investment amount: In the scheme you can invest a minimum of Rs. 1000 whereas a maximum of Rs. 1.5 lakh can be deposited in a year. Also, an investor can deposit an amount over and above this limit of Rs. 1.5 lakh.
An individual can maintain two types of account under the scheme namely- term deposit (TD) account or special term deposit (STD) account.
Tenure: Minimum tenure under the scheme is 5 years while the maximum is 10 years.
Interest rates: On these tax-saving instruments, investor can earn return at par with other deposits and interest rate on such investments ranges between 5%-7% on the basis of the investment tenure.
Taxation benefit: On the interest earned from such scheme, you can avail deduction under section 80C upto a maximum limit of Rs. 1.5 lakh and so the interest earning from SBI's tax saving scheme will be tax free in the hands of the investor.
Drawbacks of the scheme:
No premature withdrawal or redemption allowed in the scheme: The scheme does not permits premature withdrawal i.e. until and unless 5 year are completed from the issue date, investor cannot withdraw funds.
Also, the investment instrument cannot be kept as a collateral or pledged to avail of loan.