SBI Annuity Deposit Scheme
Updated on November 30, 2023
Written by Manish Kothari
CEO Zfunds
Share
The SBI Annuity Deposit Scheme is one of the best investment plans with its flexibility with the investment tenure. Like general annuity schemes, the SBI scheme requires the customers to invest a one-time amount which is repaid in monthly instalments.
In fact, having an SBI Annuity Deposit Scheme account can give you a passive income source every month. We will dive into the same in this article.
What Is SBI Annuity Deposit Scheme?
SBI Annuity Deposit Scheme is a scheme by the State Bank of India which allows you to deposit a lump sum amount in order to receive your investment as EMIs from the bank. These EMIs (Equated Monthly Instalments) are a portion of your invested amount and interest. Hence, they are also known as monthly annuity instalments.
The investment tenure for this scheme is either three years, five years, seven years, or ten years. Furthermore, the interest rate is similar to what you get in a Fixed Deposit. It’s one of the best investment plans for monthly income.
SBI Annuity Deposit Scheme Interest Rates 2023
Below are all the interest rates by the SBI Annuity Deposit Scheme.
| Period | Interest Rate for General Citizens | Interest Rate for Senior Citizens |
| 7 - 45 days | 2.90% | 3.40% |
| 46 - 178 days | 3.90% | 4.40% |
| 179 - 364 days | 4.40% | 4.90% |
| 1 - 2 years | 5% | 5.50% |
| 2 - 3 years | 5.10% | 5.60% |
| 3 - 5 years | 5.30% | 5.80% |
| 5 - 10 years | 5.40% | 6.20% |
Comparison of SBI Annuity Deposit Scheme with Other Retirement Savings Options
SBI Annuity Deposit Scheme vs. Fixed Deposit
| SBI Annuity Deposit Scheme | Fixed Deposit |
| The scheme repays you the whole amount during the investment tenure. | You receive the maturity amount at the end of your investment tenure. |
| The maturity amount is 0 at the end of tenure. | The maturity amount is an addition of your principal and interest. |
| The scheme pays you on a monthly basis. | You receive the whole amount in a one-time receiving. |
SBI Annuity Deposit Scheme vs. Mutual Funds
| SBI Annuity Deposit Scheme | Mutual Funds |
| The scheme pays the customers every month. | The mutual funds pay the investors either monthly, quarterly, semi-annually, or annually. |
| The scheme is backed by the SBI and is safe. | Mutual Funds are bound to have some financial risks. |
| The interest rate is based on the investment tenure that you choose. | Based on the type of mutual fund you’re choosing, you get an interest rate. |
Features Of The SBI Annuity Deposit Scheme
Here are all the features of the SBI Annuity Deposit Scheme:
- The minimum amount required to be deposited is ₹25,000.
- For the SBI pensioners and staff, the payable interest rate would be 1% more than the applicable interest rate.
- The SBI Annuity Deposit Scheme is accessible at all of the bank branches across India, apart from any branch that has a specialised credit intensive.
- The interest rate in this scheme is the same as an FD.
- The payment of an annuity would be credited to the current or the savings account of the holder.
- Adding a nominee is possible with the insurance of a universal passbook among all the SBI branches.
- One will receive the scheme’s annuity payment at the anniversary of the month, followed by the deposit month.
Benefits of the SBI Annuity Deposit Scheme
Below are all the benefits of the SBI Annuity Deposit Scheme:
1. Investment Tenure
The SBI annuity scheme offers a range of tenure and maturity options. If you are looking for a flexible scheme, the SBI annuity scheme is a perfect investment choice with the investment tenure ranging from 1 week to 10 years.
In short, the scheme is not only for long-term investment planners but also a great choice as a short-term investment plan.
2. Number of Deposits
The annuity scheme does not have any limit on making a deposit.
3. Loan Opportunity
One can take a loan of up to 75% of the total balance in their deposit account with the SBI annuity scheme.
4. Payments
The customers under this scheme receive monthly payments which comprise a part of their principal amount and interest earned.
Eligibility for the SBI Annuity Deposit Scheme
Here’s the eligibility for the SBI Annuity Deposit Scheme:
- All Indian residents, including minors, are eligible for the annuity deposit scheme.
- You can handle the account singly or jointly.
- However, people in the category of NRE and NRO are ineligible for the scheme.
Components Of The SBI Annuity Scheme
The SBI Annuity Deposit Scheme has 6 components which one should consider before investing. Here are all of them explained:
1. Premature Payment
Under this scheme, a premature payment is allowed on the death of the depositor. To withdraw the deposited amount prematurely, the legal heirs of the disease or joint account holders must interfere. In addition, the bank is entitled to follow the same rule.
2. Loan Facility
The scheme allows the depositor to take a loan of up to 75% of the annuity balance amount. After the payment of the loan, periodic annuity payments would be claimed from the borrower's loan account.
3. Interest Rates
SBI offers an interest rate on the basis of the investment tenure chosen by the depositor. These interest rates are then added to the principal amount for the monthly annuity payments.
4. Maturity Amount
The total invested amount and interest are paid in EMIs and monthly instalments over a period of time in an annuity deposit scheme. Hence, the maturity amount becomes zero after the tenure ends.
5. Eligibility
The SBI annuity scheme is offered to all Indian residents, including minors, which means that anyone could invest in the scheme. However, the customers who are NRE or NRO are ineligible for the annuity scheme.
SBI Annuity Deposit Scheme Example
Here's a simple SBI Annuity Deposit Scheme example:
Let's consider Mr Sharma started an SBI annuity deposit scheme with ₹50,000 for a tenure of 5 years. Hence, the bank offers an interest rate of 6.50% p.a.
According to how the annuity scheme works, the bank will compound the interest and provide returns in the form of EMIs. So, let's calculate the returns Mr Sharma would receive in the next section.
How Is The SBI Annuity Deposit Calculated?
The State Bank of India calculates quarterly interest to generate monthly investment returns. Below is the formula to calculate SBI Annuity Deposit monthly income:
A = P (1+r/n) ^ (n*t)
In this formula,
A = Maturity Amount
P = Principal Amount
R = Rate of Interest
N = The number of times the interest will compound per annum
T = Investment tenure
Now, putting in the values from our previous example, we get:
A = 50,000*(1+ 0.065/4)^(4*5)
Simplifying, Mr Sharma would earn a total interest of ₹19,021 on his principal amount of ₹50,000. In simple words, he would receive the total amount of ₹69,021 by the end of the tenure.
If we break this down further, Mr Sharma would receive ₹1,150 every month for five years. Since the bank would have returned the principal amount along with interest, the maturity amount would turn out to be 0.
FAQs
1. How to get a regular monthly income of 10,000 from the SBI annuity deposit scheme?
To receive a regular income of ₹10,000 from the SBI annuity deposit scheme, the customer will have to make a one-time deposit of ₹5,07,964 at an interest rate of 7%.
2. Which is better: annuity or FD?
It depends on your requirements. With an FD account, you will have to make an initial deposit which grows during the investment tenure and is repaid to you at maturity. However, in an annuity scheme, you have to make a one-time deposit that is given back to you in the form of EMIs with interest during your investment tenure.
3. Is the SBI annuity taxable?
Yes, all of the interest is taxable in the SBI annuity deposit scheme. This payable interest is subject to TDS.
4. What is the minimum deposit for SBI annuity?
The minimum deposit for the SBI annuity scheme is ₹25,000, however, there is no upper limit to how much you can deposit.
5. How much can I invest in the SBI Annuity Deposit Scheme?
The minimum amount required to start an SBI annuity deposit scheme is ₹25,000. However, there is no upper limit on how much you can invest in the scheme.
6. How do I open an SBI Annuity Deposit Scheme account?
Here are the steps to open an SBI Annuity Deposit Scheme account:
- Login to your net banking app and access your account.
- Go to the SBI Annuity Deposit scheme and enter the details.
A few simple steps and you will be able to earn the returns throughout the tenure of this scheme.
7. How are the monthly annuity payments calculated?
State Bank of India (SBI) calculates the annuity amount on a quarterly basis and makes monthly annuity payments in the form of EMIs.
8. When do I start receiving the monthly annuity payments?
The payments start on the anniversary date of the month. In case the date is non-existent, such as 29th, 30th, and 31st, it will be paid on the first date of the month.
9. What happens to my annuity payments if I die before the end of the tenure?
In an event of death, the SBI annuity scheme allows the joint account holders or legal heirs to take the premature payment.
10. What are the tax implications of the SBI Annuity Deposit Scheme?
The SBI annuity deposit scheme has 3 tax implications: TDS, Tax income, and Overdrafts and loans.
TDS: The interest earned on annuity deposits is subject to tax deduction at source.
Tax income: The benefits of the SBI annuity scheme are also considered as taxable income.
Overdrafts & loans: The annuity scheme allows for an overdraft or loan up to 75% of the total balance.