Now, consumers would be able to get better return on their investment in FDs. The SBI has increased the interest rate on FDs by 25 to 75 basis points. Similarly, the bank has insulated the small home loan borrowers from the hike in the lending rate by 100 basis points across the board. However, FD rate of 5 years to 10 years has been increased by only 25 basis points to 9.25%.

 

In its decision SBI increased its lending rate by one percentage point to 13.75%. This accordingly will increase rates on new loans as well as on floating loans by one percentage point. However, the bank has announced that new rates will not be applicable on the home loan up to Rs 30 lakh where existing rate is 10.50%. Interestingly, the five year FD is qualified for tax concession under section 80C.

 

The SBI has offered the 9.25% return which is equivalent to around 14.75% pre-tax return, and if a person is under 30% tax slab and invests in five-year FD with a bank, he will have Rs 30,900 tax saving. Notwithstanding, the interest income earned on the amount will attract tax at the rate of 30.9%, which includes the education cess.