All of us have a savings bank account in some bank or the other which we just use for day to day miscellaneous purposes and do not attach much value to it as we think our savings bank account is just a gateway of financial transactions. While there is no denying the fact that our savings bank account is, of course, the gateway of our financial transaction, what we do not aware about is the immense benefit that a savings bank account may offer on account of savings account interest rate.
But before we discuss that, did you know about online savings account opening? Did you know that you can now open a savings account without visiting the bank branch? To facilitate online saving account opening, the banks in India nowadays leverages biometrics-enabled ID and Aadhaar card to ensure that there is no paperwork involved. Anyone with a PAN Card, Aadhaar Card and a smartphone can now open a savings account online. For the initial account opening authentication, banks have tied up with various merchant outlets where you can visit to get your documents verified and that’s all.
The interest earned on savings bank account is the most ignored part of anyone’s investment planning. Most of us completely ignore this and may even do not know what the savings account interest rate is and how to maximize the returns by keeping more balances in the savings account.
Did you know that the saving bank account interest could be as high as 7%!
Yes, some saving bank account interest rates are as high as bank fixed deposit interest rates. While we care about the fixed deposit and do not break it prematurely what we do not understand that if we maintain good balances in our savings account, we can earn as much interest as the fixed deposits.
Most of the banks will ask us to keep a minimum of Rs 5,000 to Rs 10,000 as average quarterly balance failing which the banks levy a bank charge on account of non-maintenance of minimum balance in the savings account.
However, you may not be aware that there are other savings accounts which offer as much as 7% savings bank account interest rate even on a zero balance savings bank account on the average daily balance maintained by you. While there is no need to maintain a balance as it is a zero balance account, but if you keep some balance after transactions, your savings bank account rewards you by paying the interest even on that amount.
Did you know that the saving bank account interest upto Rs 10,000 is tax free!
Yes, savings bank account interest to Rs 10,000 is completely tax-free under section 80TTA under the Income Tax Act. This deduction is available only to individuals and HUF Savings bank account holders but unfortunately, most of us do not know about this big benefit.
Therefore, while you can earn Rs 10,000 annually tax-free from your savings bank account, the interest earned on bank fixed deposits is totally taxable from Re 1. Also, remember that Section 80TTA benefit is not available on interest earned on your fixed deposits or term deposits with a bank.
Did you know that there is no TDS in saving bank account interest?
You may be aware that bank and post offices or other financial institutions deduct TDS on the interest amount if the amount is greater than Rs. 10,000 per year. The TDS rate is 10% on interest income from Re.1 (once you cross the threshold limit of Rs 10,000) provided your PAN number is available with the bank. If the bank doesn’t have your PAN number in its records, then the TDS rates is 20% on interest income.
However, there is no TDS on saving bank account interest irrespective of any amount in a year. Thus, while you can earn as high as 7% interest on your savings bank account, the bank does not deduct any tax on it. This is a big benefit to savings bank account holders which is mostly not known to them.
Saving and managing money in a savings bank account is part of our daily financial needs, and this can be rewarding if you have a savings bank account in the bank from where you can earn as much as 7% savings bank account interest while there is no need to maintain any minimum balance.