Different banks offer varying interest rates on fixed deposits, and it’s essential for investors to be aware of these rates before making a decision. Notably, State Bank of India (SBI) and Bank of Baroda have set distinct interest rates for their fixed deposit schemes. Below, we’ll explore the interest earned on a deposit of ₹8 lakh for a five-year term.

Interest Rates Comparison:

• State Bank of India (SBI):
  • General Citizens: 6.50%
  • Senior Citizens: 7.50%
• Bank of Baroda:
  • General Citizens: 6.50%
  • Senior Citizens: 7.40%

Maturity Amount Calculation:

If you deposit ₹8 lakh in a fixed deposit scheme for five years:

• State Bank of India:
  • Regular Customers: ₹11,04,336
  • Senior Citizens: ₹11,59,958
• Bank of Baroda:
  • Regular Customers: ₹11,04,336
  • Senior Citizens: ₹11,54,279

Why Choose Fixed Deposits?

Among various investment options, fixed deposits remain highly popular due to their reliability. While investments in mutual funds are on the rise, fixed deposits consistently attract individuals looking for guaranteed returns. Many families utilize FDs for significant life expenses, such as children’s education or weddings. In fact, it is common for parents to open FD accounts in their children’s names at birth, allowing the funds to grow and be available for future needs.

Tax Benefits:

Investing in fixed deposits also offers tax benefits under Section 80C of the Income Tax Act, making it a financially wise choice for many.

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Traditionally, obtaining a physical PAN card involved a time-consuming process encompassing printing, postage, and manual handling. Urgent requirements for the card often posed challenges due to these procedural delays. To address this issue, the introduction of the e-PAN system revolutionized the application process, enabling swift digital access to PAN cards.

In the digital era, the importance of PAN cards has escalated, particularly with the advent of digital banking. Individuals need a PAN card to open bank accounts and conduct various financial transactions. For income tax purposes, strict adherence to utilizing the PAN card is essential to avail tax benefits.

The e-PAN facility offers a seamless, paperless application process, requiring only a valid Aadhaar number and a linked mobile number. Applicants can instantly receive their digitally signed e-PAN in PDF format, free of cost. This electronically signed PAN card, derived from e-KYC data sourced from Aadhaar, serves as a legally valid document for filing tax returns, financial transactions, and KYC requirements.

Individual taxpayers can swiftly access the e-PAN service by visiting the Income Tax Department’s e-filing portal. By following a few simple steps, including entering their Aadhaar number, verifying OTP, and submitting the application, users can obtain their e-PAN within minutes. The receipt number and Acknowledgment ID provided post-submission serve as crucial references for future correspondence.

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One noteworthy savings scheme facilitated by the government is the Post Office Monthly Income Plan. With a minimum deposit of Rs.1,000 and a maximum limit of Rs.9 lakhs for individuals (Rs.15 lakhs for joint accounts), this scheme currently offers an attractive interest rate of 7.4%. Investors can enjoy interest on their investment for the next 5 years without the need for additional contributions. Additionally, the Post Office Monthly Income Scheme falls under Section 80C, providing tax benefits of up to Rs.1.50 lakhs.

This scheme is particularly beneficial for individuals who seek a steady income stream without the need for monthly investments. For instance, investing Rs.8,00,000 in this scheme could yield a monthly return of Rs.4,933 for 5 years, showcasing the potential for long-term financial growth through prudent saving and investment decisions.

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These are mutual funds that invest primarily in equity and equity-related instruments, and enjoy tax benefits under Section 80C of the Income Tax Act, 1961. In this background, let us delve deeper into the details of the ELSS scheme.

Benefits of ELSS Scheme:Investments in ELSS under section 80C under the old tax system offer a Rs. 1.5 lakh tax exemption. While this helps save taxes, ELSS has a mandatory lock-in period of 3 years. ELSS funds mainly invest in equities, providing the opportunity for higher returns. However, they also come with high risks due to market volatility.

You can choose between growth and dividend options based on your financial goals. The growth option reinvests profits, while the dividend option provides periodic payments. Long-term capital gains above Rs. 1 lakh are taxable in a financial year.

Investing in ELSS funds can be done through a direct plan or a regular plan. The direct plan involves investing directly through a mutual fund website or app, which typically has lower expense ratios. On the other hand, the regular plan has a higher expense ratio and requires investing through an intermediary like a broker or distributor.

If you invest Rs. 1.5 lakhs, your taxable income under Section 80C would be reduced by the same amount. For those falling under the 30% tax bracket, this could save you around Rs. 46,800 in taxes, including cess. After 3 years, your investment may grow to Rs. 2 lakhs, with Rs. 50,000 taxed at 10% on Long Term Capital Gains.

ELSS presents an excellent investment option for individuals seeking to save taxes while aiming for potential wealth creation. Experts emphasize the importance of understanding the risks and returns associated with these funds. While ELSS offers benefits, it’s crucial to consider the lock-in period and market risks before investing. Consultation with a financial expert is recommended to align ELSS with your financial goals and risk tolerance.

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