SBI FD Calculator: Which tenure offers the best return on an investment of ₹1 lakh?

SBI FD Calculator: Every investor—whether small or large—prioritizes keeping their hard-earned money in a safe place while earning guaranteed returns. When it comes to savings and secure investments, the country's largest public sector bank, the State Bank of India (SBI), enjoys the highest level of public trust. Most people prefer parking their savings in Fixed Deposits (FDs) because, unlike the stock market, there is no associated risk. However, before opening an FD with any bank, it is crucial to understand how much your money will grow over a specific period. The final maturity amount depends entirely on the bank's interest rates and the investment tenure you choose. Let us use simple calculations to understand the returns a customer would earn by depositing ₹1 lakh in SBI's retail term deposit scheme over different timeframes.

**What will the return on investment be?**
State Bank of India offers varying interest rates based on the investment tenure for general customers. If an individual invests ₹1 lakh in an SBI FD, the return varies according to the duration.

If you open an FD for a tenure of one year, the bank offers an annual interest rate of 6.25%. Based on this, the principal amount of ₹1 lakh will grow to approximately ₹1,06,398 upon completion of the year—yielding a direct gain of ₹6,398.

If an investor deposits their money for three years, the bank offers an interest rate of 6.30%. Upon completion of the three-year term, the deposited capital grows to approximately ₹1,20,642.

Meanwhile, for a five-year investment, the bank offers an interest rate of 6.05%. After five years, the initial ₹1 lakh grows to approximately ₹1,34,982. If an investor leaves their capital in the bank for a long period of 10 years, they reap significant benefits from compounding. After 10 years, a sum of ₹1 lakh grows to approximately ₹1,82,400.

**Special Benefits for Senior Citizens**
Banks consistently offer additional benefits to ensure the financial security of senior citizens. The State Bank of India offers an interest rate that is 0.50% (50 basis points) higher for senior citizens aged 60 and above compared to regular customers. This slight increase in the interest rate has a substantial impact on the maturity amount over the long term.

For a 1-year Fixed Deposit (FD), senior citizens earn interest at a rate of 6.75%. Consequently, an investment of ₹1 lakh grows to approximately ₹1,06,920 in one year.

For a 3-year tenure, senior citizens earn 6.80% interest. Upon completion of the 3-year term, the deposit amount grows to approximately ₹1,22,430.

For a 5-year tenure, senior citizens receive an impressive interest rate of 7.05% (which is above 7%). At this rate, an investment of ₹1 lakh grows to approximately ₹1,41,680 (roughly ₹1.42 lakh) over five years.

The most significant benefit is observed over the long term of 10 years. After 10 years, the senior citizen's initial investment of ₹1 lakh grows to exceed ₹2,01,000. In other words, the money more than doubles over this extended period.

**Rules Regarding Tax Liability on Interest**
Many investors often mistakenly believe that the money deposited in an FD and the returns earned on it are entirely tax-free. However, this is not the case. Under current income tax rules, the entire interest earned on fixed deposits is fully taxable.

The amount of tax you are required to pay on your FD interest depends entirely on your total annual income. Additionally, it depends on whether you have opted for the old tax regime or the new tax regime. Your tax liability on the FD interest is determined by the tax bracket into which your total income falls.

Provisions regarding bank TDS deduction
Banks deduct Tax Deducted at Source (TDS) on FD interest once it exceeds a certain limit. Investors should note that TDS is not a separate or additional tax.

When you file your Income Tax Return (ITR) at the end of the financial year, you can easily adjust the deducted TDS against your total tax liability. If your total annual income falls within the tax-exempt limit and your tax liability is zero, you can claim a refund for the TDS deducted by the bank by filing your ITR.

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