SBI's Tax Savings Scheme Vs Flexi Deposit Scheme: Interest Rates, Other Details Compared

State Bank of India (SBI) offers various deposit schemes under its personal banking portfolio. SBI's Tax Savings Scheme, 2006 offers tax benefits for up to Rs. 1.5 lakh under Section 80C of Income Tax Act, as mentioned on country's largest lender's portal-bank.sbi. The bank also offers Flexi Deposit Scheme for customers, which is a product similar to recurring deposit (RD) but instead of a single fixed instalment every month, user can decide to vary his/her instalment amount and even the number of monthly within the annual sum defined.

SBI's Tax Savings Scheme, 2006 in detail

Resident Indians as an individual or in the capacity of the Karta of the Hindu Undivided Family, having income tax Permanent Account Number (PAN) are eligible to avail the benefits of SBI's Tax Savings Scheme, 2006. One can deposit a minimum of Rs 1,000 or multiples thereof whereas the maximum deposit should not increase Rs.1,50,000 in a year, according to SBI.

One needs to have either Term Deposit (TD) account or Special Term Deposit (STD) account to apply for the SBI's Tax Savings Scheme, 2006. The minimum tenure is for five years and maximum is 10 years. The savings scheme does not have specific rate of interest and the interest is similar to that of term deposits. 

One cannot withdraw the term deposit before the expiry of five years from the date of its receipt.
People planning to invest in the savings scheme cannot use TD/STD to secure loan or as security to any other asset. However, the nomination facility is available.

SBI's Flexi Deposit Scheme in detail

For a financial year, the minimum deposit amount is Rs. 5,000 and maximum deposit amount is Rs. 50,000 under SBI's Flexi Deposit Scheme. Deposits can be made anytime during a month and any number of times. The minimum tenor is 5 years and maximum is 7 years.

Just like SBI's Tax Savings Scheme, 2006, the rate of interest is same as applicable to term deposits. However, quarterly compound interest is also applicable.

Unlike SBI's Tax Savings Scheme, 2006, premature withdrawal is allowed in SBI's Flexi Deposit Scheme. The rate applicable in case of premature withdrawal is 0.50 per cent below the rate applicable for the period the deposit has remained with the bank. The penalty charges for non-deposit of monthly instalments amounts to Rs 50 per financial year, said SBI. Loan facilities as applicable to term deposits are also applicable.