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

SBI FD Calculator: Which tenure yields the best returns on a ₹1 lakh investment? Every investor—whether small or large—prioritizes securing guaranteed returns by keeping their hard-earned money in a safe place. When it comes to savings and secure investments, the State Bank of India (SBI)—the country's largest public sector bank—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 risk involved.

 However, before opening an FD with any bank, it is crucial to understand how much your money will grow over a specific period. The 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 on a ₹1 lakh investment in SBI's retail term deposit scheme across different tenures.

**What will the return on investment be?**
State Bank of India offers varying interest rates to general customers based on the investment tenure. 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%. Consequently, upon completion of the year, the principal amount of ₹1 lakh grows to approximately ₹1,06,398—yielding a direct gain of ₹6,398 in one year.

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%. Upon completion of 5 years, this sum of ₹1 lakh grows to approximately ₹1,34,982.

If an investor keeps their capital in the bank for a long-term period of 10 years, they reap significant benefits from compounding. After 10 years, the ₹1 lakh investment grows to nearly ₹1,82,400.

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

For a 1-year FD, senior citizens earn interest at a rate of 6.75%. At this rate, 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 period, the deposit 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 5 years.

The most significant benefit is seen over the long term of 10 years. Upon completion of 10 years, the senior citizen's investment of ₹1 lakh grows to exceed the ₹2,01,000 mark. In other words, the money invested by senior citizens more than doubles over the long term. 

Rules Regarding Tax Liability on Interest
Many investors often mistakenly believe that the principal amount deposited in a Fixed Deposit (FD) and the returns earned on it are entirely tax-free. However, this is not the case. Under current income tax regulations, the entire interest earned on a Fixed Deposit is fully taxable.

The amount of tax you are required to pay on your FD interest depends entirely on your total annual income. It also depends on whether you have opted for the old tax regime or the new tax regime. Your tax liability on 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 threshold. 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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