State bank of India (SBI) has revised the interest rate on its Tax Saving Fixed Deposit Scheme to 8.75% for General Public while interest rate for Senior citizens has remained the same at 9.00%.
As I have pointed out earlier, if you see the advertisement by SBI, it promises annual yield of 17.39% for Senior citizens and 17.01% for others. Even UCO Bank has published advertisement for its Tax saving Deposits where it only shows the annual yield but not the actual rate offered. I am sure a lot of people would not be clear about difference between yield and FD rate.
RBI and similar governing bodies should take a note of this kind of miss-selling and prevent such things. Imagine advertisement by Mutual Funds telling that they can double your money in a year as they have actually done that in the past!
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Whats wrong with the SBI Advertisement?
The advertisement below assumes that while investing you are in 30% tax bracket but when the FD matures you are paying no taxes. Now this might be valid assumption for selected set of population. Under normal circumstances you would be in similar or higher tax bracket when this FD matures after five years.
What should you do?
If you are looking to invest in Tax Saving FD, SBI might be good option but be careful of what is published in the advertisements and keep realistic returns expectations.