SBI 5-Year FD vs SCSS: Which can offer better returns on Rs 5,00,000 investment?
Compare SBI Fixed Deposit and Senior Citizens Savings Scheme (SCSS) to find out which offers better returns, tax benefits, and flexibility on a Rs 5,00,000 investment over five years.
Senior Citizens Savings Scheme (SCSS) and Fixed Deposits (FD) are popular investment options for risk-averse investors. SCSS is a government-backed scheme offering quarterly interest payouts and Section 80C benefits, while FDs are bank-provided deposits offering flexible tenures and steady returns.
Overview of Senior Citizens Savings Scheme (SCSS)
The SCSS is a government-backed investment plan designed for senior citizens, offering a high annual interest rate of 8.2% with assured quarterly payouts.
Key Features of SCSS
- SCSS accounts can be opened by individuals aged 60 or above.
- Retired employees aged 55–60 are also eligible under specific conditions.
- The minimum deposit is Rs 1,000, and the maximum investment limit is Rs 30 lakh.
- The scheme has a 5-year tenure, extendable by 3 years.
Interest Rate and Taxation for SCSS
- Interest is paid quarterly at 8.2% annually.
- Tax deduction at source (TDS) applies if the total annual interest exceeds Rs 50,000, unless Form 15G/15H is submitted.
SCSS Returns on Rs 5,00,000 Investment
- Quarterly interest payout amounts to Rs 10,250
- Over 5 years, the total interest earned is Rs 2,05,000
- The maturity value for Rs 5,00,000 is Rs 7,05,000
Premature Withdrawal Rules for SCSS
- Accounts can be closed before maturity, but penalties apply.
- A 1.5% deduction from the principal is made for closure within 2 years.
- A 1% deduction applies for closure after 2 years but before maturity.
Overview of SBI Fixed Deposit (FD)
SBI Fixed Deposits offer interest rates ranging from 4.00% to 7.75% for senior citizens, depending on the tenure, which can vary from 7 days to 10 years.
SBI FD Returns on Rs 5,00,000 Investment
The total interest earned over 5 years is Rs 1,90,210.
The maturity value is Rs 6,90,210 for the invested amount of Rs 5,00,000.
Taxation on SBI FD
- Interest earned is fully taxable as per the investor's income tax slab.
- TDS is deducted if annual interest exceeds Rs 40,000 for general citizens or Rs 50,000 for senior citizens.
Comparing Returns of SCSS and SBI FD
- SCSS offers a higher interest rate of 8.2% compared to SBI FD’s 7.75%.
- SCSS provides quarterly payouts, while SBI FD interest is typically compounded and paid at maturity.
- SCSS investments qualify for tax benefits under Section 80C, whereas SBI FD does not.
SBI 5-Year FD vs SCSS
SCSS stands out with higher returns, tax-saving benefits, and quarterly payouts, making it ideal for senior citizens seeking steady income. SBI FD, however, is more flexible with tenure options and suits a wider range of investors.