Overview of Savings Account
Savings Account is one of the basic financial products that everyone must have and use. A savings account will let you save money, transfer funds, withdraw money and also will give you interest on the funds that you have in your account. Not many investment products in the market give you the dual benefit of liquidity and interest. But, a savings account will not only help you save some money but will also let you withdraw cash whenever you need it.
Depositing money in a savings account will help you realize your short term financial goals with ease. With banks offers different types of savings account such as specialized accounts for kids, savings account for women and pensioners savings account, you can choose a savings account that fits your lifestyle and usage.
One of the key points to note about a savings account is its interest rate. Read on to find more about how savings account interest rate is calculated and savings account interest rates for major Indian banks.
How is the savings account interest rates Calculated?
As per the new RBI mandate, interest on savings account is calculated on a daily basis based on your closing amount. The interest accumulated will be credited to your account on half yearly basis or quarterly basis depending on the savings account type and the bank’s rule. However, recently, the Reserve Bank of India has advised the banks to credit the interest on Savings Bank account on quarterly basis as it will be more beneficial to the customers.
Generally, the formula described below is used to calculate the monthly interest for a general savings account.
Monthly Interest = Daily Balance * (Number of days) * Interest / (Days in the year)
Assuming the daily balance is Rs. 3 lakhs and the interest on savings account is 4 per cent per annum, the calculation will work out as follows.
Monthly Interest = 3 lakhs * 30 * (4/100) / 365 = Rs. 986
Benefits of a Savings Account
There are countless benefits that a savings account will offer you. Here are some of the major advantages of maintaining a savings account.
- When you deposit money in a savings account, you can be sure that the money is secure. Whenever there is a financial emergency in future, the money can be acquired.
- The money that is deposited in a savings account can be accessed at any point of time. In case of a sudden requirement, you can withdraw cash from your bank or from the debit card without any hassles.
- A savings account will let you start investing with minimum cash. All you have to do is open a savings account with the minimum required deposit and start deposit funds whenever possible.
- With a savings account, banks also give you the access to internet banking and phone banking which will open a whole new world of quick transactions. You can transfer funds using NEFT & IMPS, pay utility bills, check transactions and link credit card accounts to your savings account using Internet Banking facility without any hassles.
- Select banks offer personal insurance benefits with savings account.
Minimum Balance Requirements in Savings Account
If you read the fine print for a savings account, you will come across “Minimum Average Balance Requirements”. Many banks use the terms minimum daily balance, minimum quarterly balance or just minimum balance. Average Balance means the amount that has to be maintained in your savings account over a certain period of time. Average Balance is calculated by summing up the everyday balance and dividing it by the number of days in the defined period.
For example, if a savings bank account has an average quarterly balance of Rs. 3000, the average of the daily balance in your account for that quarter should have been Rs. 3000. Instead, you can also have Rs. 5, 40, 000 as the balance for one day of that quarter.
If you do not maintain the specified balance requirements, you will have to pay a non - maintenance penalty.
Almost all major Indian banks now offer Basic Savings Bank Deposit Account (BSBDA) which is a zero balance account. No penalty will be levied and you can use your BSBDA account as a normal savings account.
TDS on Savings Account Interest
The interest amount that you gain from a savings account is referred to as “Income from Other Sources”. This interest must be filed for Income Tax Returns. But, TDS is not applicable for a savings account as per section 194 A of IT Act . Savings Bank Account Interest amount exceeding Rs. 10, 000 will be taxed at marginal tax rate of the concerned account holder. It is also important to note that interest from a savings account is not an exemption but a deduction. The deduction is allowed for interest incomes up to Rs. 10, 000 only and for this purpose, the savings account must be held with a recognized public or private bank or with the Post Office.
Saving Account Interest Rate Calculator
A Savings Account Interest Rate Calculator will let you find out the interest that you will get from a savings account. In a Savings Account Interest Rate Calculator, you will be required to enter information like average balance and interest rate offered by the bank. You will also be required to select if the interest will be credit on a monthly, quarterly, half yearly or yearly basis. The calculator will output the interest that you will get for the daily balance and the savings account interest rate.
Savings Account Interest Rates for all Major Banks in India
Here is a list of savings account interest rate offered by all major Indian Banks.
|Bank / Product||Interest Rate|
|RBL Bank Savings Account||Daily Balance Above Rs. 10 lakhs - 7. 1% per annum Daily Balance Above Rs. 1 lakh - 6. 1 % per annum Daily balance upto Rs.1 lakh - 5. 1 % per annum|
|Kotak Mahindra Bank Savings Account||6% per annum|
|Yes Bank Savings Account||6% per annum on Savings Account balances below Rs.1 crore|
|Bandhan Bank Savings Account||Daily balance upto Rs.1 lakh. Interest paid half yearly - 4. 25% per annum Daily balance above Rs.1 lakh. Interest paid half yearly - 5% per annum|
|Axis Bank Savings Account||4% per annum|
|Lakshmi Vilas Bank Savings Account||Daily Balance Upto Rs.5 lakh - 5% per annum Above Rs.5 lakh - 6% per annum|
|IndusInd Bank Savings Account||Daily balance upto Rs.1 lakh - 4% per annum Daily balance above Rs.1 lakh but less than Rs.10 lakhs - 5% per annum Daily balance above Rs.10 lakhs - 6% per annum|
|HDFC Bank Savings Account||4% per annum|
|ICICI Bank Savings Account||4% per annum|
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GST of 18% is applicable on all banking products and services from July 1, 2017 onwards.