A savings account is a bank account or salary account where you deposit your hard-earned money in order to gain an interest rate against your deposit. While these accounts do not pay a high rate of interest, their dependability and stability make them a better bet for savings as well as to generate returns. Savings bank accounts usually pay lower interest rates than fixed deposit accounts. However, as opposed to leading private banks, some small and emerging private banks pay higher interest rates on savings accounts. It's crucial to consider how much interest banks pay for holding the money in a savings account. A savings account is the most basic kind of bank account. It's a form of account that helps you to manage and handle your money. Owing to the various needs and requirements of customers, banks have started to provide various forms of savings accounts to satisfy their financial requirements. Hence, before you open a savings account with any bank let's check out the higher interest rates that are currently provided by the top 10 banks of India.
Benefits of opening a savings account
A savings account is the most common kind of bank account. It's a form of account that helps you to prepare and control your finances. Although a savings account has many perks, it just pays a low annual interest rate. Opening a savings account, on the other hand, has several advantages. Let us learn about them. Below are some of the advantages of maintaining a savings account:
- One of the core advantages of maintaining a savings account is the liquidity that it brings.
- Another thing to keep in mind is that each account is covered for up to Rs. 5 lakh by the Deposit Insurance and Credit Guarantee Corporation which makes it a more secure place to save your money.
- Lenders have an auto sweep facility, which instantly converts funds above a certain amount into a fixed deposit. In contrast to standard savings rates, these funds receive interest at fixed deposit rates. The depositor can reap the maximum advantages of holding money in a savings account by allowing this functionality.
- Customers can enable automatic debits for utility payments and bills at their banks. In those situations, the utilities or service provider files a request with the bank, and the bank debits the amount immediately. This is a simple means of making prompt payments using your savings bank account.
- Savings accounts can be linked to Demat accounts and other holdings, which is one of the advantages of having capital in one. Dividends and interest payments are directly credited to the bank account in such situations. This simply means that all cash flows are consolidated into a single account.
- Fund transfers from a savings account are incredibly easy. There are a variety of fund transfer options available for both online banking and mobile banking. A savings bank account holder can use NEFT, RTGS, IMPS, and UPI to transfer money from his or her account to the beneficiary.
- Interest income from a savings account is taxable under the heading of "Income from other sources." Furthermore, Section 80TTA allows a deduction of up to Rs 10,000 on such interest income, thus interest earned in excess of Rs 10,000 is subject to taxation.
Tax deductions under 80TTA
Interest received on a savings bank account that reaches the deduction cap is taxed under the classification 'Income from other sources' at the taxpayer's tax slab level. However, if you forget to report it on your ITR, you can expect to receive an income tax warning as a result. And the applicable penalty is more drastic than the tax on interest received on a bank account. Section 80TTA of the Income Tax Act enables a deduction of interest received on a savings bank account up to Rs 10,000 annually. This cap covers interest from all banks, co-operative banks, and post office savings accounts. If the interest received from these sources reaches Rs 10,000, the excess will be taxed as 'Income from other sources.' It's worth remembering that the exemption under Section 80TTA is based on the total interest earned from all of your bank accounts, not per bank account. Interest earned on time deposits, such as fixed deposits, recurring deposits, or some other time deposit, is not available for the Section 80TTA deduction. On interest income from bank savings accounts, no tax is deducted at source. Senior citizens are not covered under Section 80TTA. They get a better tax break under a separate section. Senior citizens are not covered under Section 80TTA. They get a better tax break under a separate section of the law. Section 80TTB enables a senior citizen to deduct interest gained on savings deposits and fixed deposits with banks, post offices, or co-operative banks for an amount up to Rs 50,000. Even, up to Rs 50,000, there will be no tax deducted at source. This Rs 50,000 cap must be calculated individually for each deposit.
Minimum deposit amount limit
Private bank savings accounts have a minimum balance limit that ranges from Rs 500 to Rs 10,000. The banks keep this higher than public sector banks because they are more responsible for supporting services to the salaried and non-salaried individuals. The minimum balance threshold at Bandhan Bank is Rs 5,000. This is followed by the RBL Bank, IndusInd Bank, IDFC First Bank and Yes Bank with a minimum deposit balance of Rs 500-Rs 2500, Rs 1500 to Rs 10,000, Rs 10,000 and Rs 2500 to Rs 10,000 respectively. The minimum balance threshold varies between Rs 2,500 and Rs 10,000 at major private banks including Axis Bank and HDFC Bank respectively (according to the below listed table). Whereas the leading lender of the country State Bank of India is currently providing an interest rate of 2.75% p.a for account balance up to and above Rs 1 lakh.
Savings account interest rates
Small private sector banks, such as Bandhan Bank, are offering interest rates as high as 7.15 per cent in the face of declining interest rates. RBL Bank, IndusInd Bank, and IDFC First Bank bid 6.5 per cent, 6.5 per cent, and 6 per cent, respectively, on savings accounts. Whereas on the other hand, some small finance banks pay higher interest rates on savings accounts in contrast to leading private and major public sector banks. AU Small Finance Bank and Ujjivan Small Finance Bank, for example, offer interest rates as high as 7% and HDFC Bank and ICICI Bank, for example, bid only 3 per cent to 3.5 per cent interest rate. Axis Bank and Kotak Mahindra Bank are now promising interest rates of up to 4%. On their savings accounts, the State Bank of India (SBI) is paying 2.70 per cent interest and the Bank of Baroda is providing up to 3.20 per cent interest respectively.
|Sr No.||Banks||ROI in % per annum||Minimum balance limit|
|1||Bandhan Bank||3 to 7.15||Rs 5,000|
|2||RBL Bank||4.75 to 6.5||Rs 500 to Rs 2,500|
|3||IndusInd Bank||4 to 6||Rs 1,500 to Rs 10,000|
|4||IDFC First Bank||3.5 to 6||Rs 10,000|
|5||Yes Bank||4 to 5.5||Rs 2,500 to Rs 10,000|
|6||DCB Bank||3.25 to 5.5||Rs 2,500 to Rs 5,000|
|7||Karnataka Bank||2.75 to 4.5||Rs 1,000 to Rs 2,000|
|8||South Indian Bank||2.35 to 4.5||Rs 1,000 to Rs 2,500|
|9||Axis Bank||3 to 4||Rs 2,500 to Rs 10,000|
|10||Kotak Mahindra Bank||3.5 to 4||Rs 2,000 to Rs 10,000|
|Source: Official site of the listed banks|