How to determine the interest income on your Savings Account?

 A Savings Account is a basic financial product offered by banks. Such an account lets you deposit your savings safely with the bank. Apart from security, you can also access this money whenever you want. Hence, it works as a liquid investment. It also enables you to earn a decent interest on the funds you deposit in your account at a specific rate determined by the bank.

Let us understand how the interest on your Savings Account is calculated and how a Savings Account interest calculator helps. We will also understand the tax implications of the interest you accumulate in your account and ways to improve your interest income.

How is the interest calculated?

The interest you earn on the funds in your Savings Account depends on the rate determined by your bank. It also depends on the balance you maintain. As per RBI guidelines, banks should calculate the interest daily based on the closing balance you maintain daily. However, they credit the interest income monthly, quarterly, or half-yearly. Today, you can open a Savings Account using the Banking app or bank website.

Alternatively, you can visit the branch to open one. Once your account is operational, you can start depositing funds. Your account also starts accumulating interest. The formula to calculate the interest you earn on your account is usually as follows:

Interest calculated every month= (Daily balance * Number of days * Interest rate) / Total number of days in the year

How can an online calculator help?

To simplify the process of ascertaining the interest income on your Savings Account, you can consider using an online Savings Account calculator. It prevents you from calculating the amount manually. Just enter key information, like the average balance and the interest rate your bank offers, and the tool does the job for you.

Tax implications

In India, the interest income you earn on your Savings Account is taxed under the Income Tax Act. The banks do not deduct any TDS. However, you can avail of deductions u/s 80TTA of the IT Act. Under this section, interest income of up to Rs. 10,000 you earn annually is not taxable. As a result, if your interest income does not exceed Rs. 10,000, you need not pay any taxes on it.

Ways to maximise interest income

To earn more interest on your Savings Account, follow these steps:

• Compare interest rates offered by various banks when opening an account.
• Save and maintain a higher monthly balance in your account. You can utilise Online Banking to review your account balance regularly.

Conclusion

Knowing how to determine the interest on your Savings Account lets you make informed financial decisions. In addition, you should be aware of the tax implications to ensure compliance and optimise your returns.