Understanding Savings Account Tax Implications

Savings Account is a common financial product. The account allows you to park your earnings, reap attractive interest rates and easily access funds when required. You should open a Savings Account if you wish to grow your savings. You can choose to open an account at any leading bank or financial institution. Pay attention to the interest rates when opening the account.

A higher interest rate translates to higher interest income. Let us understand the connection between Savings Account interest rates and their tax implications.

Tax benefits and interest rates

Savings Account rates are calculated considering your closing balance at the end of the day. A higher deposit attracts a higher rate. Generally, an interest rate of 3.25% is offered on deposits up to Rs. 1 lakh. The interest rate hikes as the deposit amount exceed the given slab. Holding a higher account balance is always recommended to maximise your interest earnings. Besides, maintaining the minimum balance requirement contributes to your Savings Account.

Your contributions lead to an appreciation in your principal deposit, increasing your interest earnings.

How are Savings Account interest rates taxed?

Like every investment instrument, interest rates on Savings Account are taxable. When filling your Income Tax Returns, you should declare interest income from your online Bank Account under ‘income from other sources’. You get taxed as per the Income Tax slab rate you fall under. Note that different set of taxation rules apply to senior citizen holders.

There are a few tax deductions granted by the Indian government on your interest earnings. However, only Indian citizens are eligible to claim those.

How can you claim Savings Account tax deductions?

There are two ways to claim tax benefits online Saving Account opening: Section 80 TTA and Section 80 TTB.

Section 80 TTA

This was introduced during the Union Budget of 2013. The tax policy allows people to claim a tax deduction on their interest income. As per Section 80 TTA, you can claim deductions of Rs. 10,000 on the accumulated interest income from all your Savings Accounts. Individuals belonging to Hindu Undivided Family (HUF) and holding the Savings Account can claim this benefit.

Section 80 TTB

This was introduced during the Union Budget of 2018. The primary aim is to allow pensioners and senior citizens to earn more income by availing of the tax benefit. Here, you can claim a tax deduction of Rs. 50,000 on your interest income in a financial year. The tax benefit applies to all interest-generating investments like Saving Bank Account, Fixed Deposits, and Term Deposits. Anyone above the age of 60 years can claim this benefit.

Note: You can avail the mentioned tax deduction over and above Section 80C tax benefit.

Ways To Access Funds In Your Savings Account

Savings Account is a standard financial product that most banks and financial institutions offer. Park your savings here and earn profitable interest rates on your balance. Owing to its interest-generating abilities, Savings Account is considered a good investment instrument. A significant advantage of growing your savings is the ease of access. There is no lock-in period or tenure applicable to Savings Account.

You can access your funds anytime. Following are the ways to access funds in your Savings Account:

ATM withdrawals

The most common way is through ATM withdrawals. All Savings Account holders receive a Debit Card upon opening the account. You can insert it at any ATM to withdraw funds. As a security measure, these cards are inactive when you receive them. You need to activate them to make a transaction. You can easily activate them by setting a PIN at the ATM.

Generally, no charges are applicable to make ATM withdrawals. However, the bank may charge you a basic fee if you withdraw funds from another bank’s ATM. There is also a limit to the funds you can withdraw from your account daily. Reach out to your bank to understand the details.

Bank-to-bank transfer

If your close relative has a personal emergency and needs funds, you can help them out. You need not visit the bank. Just withdraw funds and help your family member. You could also make a direct bank-to-bank transfer. Make sure you activate online services when opting for an online Saving Account opening. You require the beneficiary details to make an instant bank transfer.

Ask them for their Bank Account number, branch name, and IFSC code. Feed them correctly on the bank portal. You can transfer funds and help your relative within minutes.

Direct debit

Direct debit works like an online transaction. This is generally used to make repayments and investments. You can use your online Bank Account to pay utility bills. Give standing instructions to your bank to make periodic payments like utility bills, Insurance premiums, and Loans. The bank directly debits the amount from the account. The automatic payment feature of the Savings Account helps you stay ahead of your bill due dates.

Cashier’s cheque

Another way to access funds is by writing a cheque. You could either write a cheque to yourself or another account holder. You need to deposit the cheque in the bank to receive funds. Make a note of the bank timings before visiting it to deposit your cheque. Alternatively, you can withdraw the cheque at the nearest ATM, provided they have a drop box.

Types Of Savings Account You Can Open In India

For many of us, our first Bank Account is our parents' open or the one we hold with them. The moment we start earning, we realise we need to secure our hard-earned funds in our Savings Account. This is when we visit the bank for opening an account and start our independent financial journey.

In India, you can do multiple online Savings Account opening as options to choose from. Let us understand them in detail.

Regular Accounts

This is the most common one where there are limits on the funds deposited. However, there are restrictions on withdrawals. You can do so only through cheque payment slips or ATMs. You are given a chequebook after opening the account and need to maintain an average monthly balance.

Joint Accounts

If the account gets operated by more than one person, it is a Joint Account. In India, such accounts are more of a family account where four people are named as account holders. If all the holders are adults, the banks offer a Debit Card to them. All adult account holders can jointly operate the account.

Salary Accounts

Most organisations provide such accounts to their employees when they join. Such an account is called Zero-Balance Account, and here, you need not maintain a monthly average balance. Generally, these account holders are provided with an instant welcome kit that includes a chequebook, passbook, Debit or ATM Card, and Online Banking access credentials.

Online Accounts

Also called an online account, this is ideal for those who want to manage their banking needs seamlessly. You also get high Savings Account interest rates instead of the Regular Account. You also need not pay any account maintenance fees and no requirement of minimum balance maintenance too.

Senior Citizen Accounts

Specially meant for the older people, particularly those over 60 years and above, they are offered higher interest rates, around 0.5%, on their savings. They are also given waivers maintaining a minimum balance and offered better interest rates on term deposits.

Women Accounts

Ladies over 18 years and above can open a Saving Bank Account that comes with maximum benefits. Opening such accounts mean higher interest rates. Women also receive discounts on other bank products and complimentary Insurance cover. They also get Debit Cards with high withdrawal and shopping limits.

Minor Accounts

A Joint Account, here the primary holder is the minor and operated by one of the parents or guardians until the minor turns 18 years. Once turned 18, the account automatically gets converted to a Regular or Joint Account.  

Pradhan Mantri Jan Dhan Yojana

For encouraging all Indians, especially the lower-income groups to open a Bank Account offline or on the Banking app, the Indian Government launched this unique Savings Account. There is no average monthly balance maintenance commitment. Account-holders get Rupay Debit Cards, and free Accident Insurance Cover worth Rs. 1 lakh and Insurance cover of Rs. 30,000.

Understanding The Difference Between NEFT and RTGS

With the increased technical knowledge and introduction of digital payment systems, online Fund Transfers have become the norm. Users have various modes to choose from. However, some time-tested mediums enjoy popularity for inter-bank transfers. They are National Electronic Funds Transfer and Real-Time Gross Settlement. The Reserve Bank of India (RBI) regulated systems enable you to transfer to Savings Account directly.

One thing to note is the speed you get with these traditional systems. They are apt for making quick payments and peer transfers across India. Both offer advantages but have different settlement concepts and are suitable for specific purposes. Understanding this disparity helps in making the proper selection for transferring funds. Consider these factors to understand the

Settlement process

The method of settling payments is the significant RTGS and NEFT difference. The funds get settled hourly in NEFT and get processed in batches on weekdays. The timing varies on Saturdays, and no transfers occur during Sundays and Bank holidays. This processing happens within two hours. RTGS takes place in a specific time slot prescribed by the Reserve Bank of India, but the processing is immediate.

Timing

Getting the timing right is crucial to access these services. As discussed, NEFT gets processed in batches. This happens between 8:00 AM to 6:30 PM on weekdays. The timing varies on Saturdays. RTGS, on the other hand, begins from 9:00 AM and lasts till 4:30 in the evening. These timings change based on the regulations and depending on the bank. Ensure to check the same before online Saving Account opening.

No transfer takes place in both the cases on Sundays and bank holidays. If these transactions fail, the refund procedure varies for NEFT vs RTGS.

Difference between NEFT and RTGS:

Transaction limit

It is crucial to stay mindful of the minimum permissible limit while making transfers to avoid charges. While there is no restriction in NEFT, you require a minimum of Rs. 2 lakh to make transfers using RTGS. This is because it is meant for high-value transactions. As for the upper cap, there is no limit on both payment methods. Hence, opt for RTGS for transferring a considerable amount, whereas NEFT is suitable for regular transfers.

Charges

When you use NEFT to make outward transactions that amount to Rs. 1 lakh, you pay Rs. 5 plus service tax. The fees go up to Rs. 25 plus service tax if the transaction amount exceeds Rs. 2 lakh. Outward transactions in RTGS attract charges of up to Rs. 30 per transaction if the amount is around Rs. 2 lakh to Rs. 5 lakh. You get the exact details when you use these services through banking apps.

How To Effortlessly Open A Savings Account Online?

 Are you looking for a perfect place to deposit your savings and earn a reasonable interest over a period? You might want to start by opening a Savings Account online to simplify your financial life further.

Online Savings Account opening might be the best thing for humankind since the technology was invented. Make use of your ideal money by quickly depositing it in an online Bank Account. Here is how: 

Opening account online 

• Firstly, ensure you are a Bank Account holder in the bank of your choice where you wish to open a Bank Account.
• Processing details instantly has gotten easier when you already have the list of documents handy with you. You find this list on the bank’s website. It is advisable to keep mandatory documents like Aadhaar, address proofs, and a PAN card with you.
• Now, visit the official website of the desired bank or download their banking app.
• Speed up the opening procedure with video-KYC on computers or smartphones with video and audio calling features.
• After your details get verified by the bank, your account is accessible immediately.
• Other starter kits for your Savings Bank Account get mailed by the bank post. 

Required list of documents 

Some of the documents that banks ask for online Bank Account are: 

• Account opening form that includes all the details asked and affixing your photograph on the same.
• Choosing from a range of documents that serve as ID proofs:
• PAN Card
• Aadhaar Card
• Passport
• Driving License
• Voter ID Card
• Employee ID Card
• Other photo IDs provided by central or state government
• Banks accept permanent or temporary Address proofs such as:
• Passport
• Aadhaar Card
• Ration Card
• Driving Licence
• Utility Bills like electricity, telephone, gas, or water
• Rental lease/agreement

Service charges or fees associated with the account 

Eligibility	Anybody above 18 years with KYC
Initial Minimum Deposit	Rs. 500
Minimum Account Balance	NIL
Maximum End of Day Balance	Rs. 1 lakh
Monthly Average Balance (MAB)	NIL
Annual Interest Rate	2.25% (Applicable from 1st of Feb 2022)
Interest Payment	Quarterly
SMS Alerts	Rs. 10 Quarterly
Account Statement	Free Monthly e-statement*
Balance certificate per Instance	Rs. 50
Card/ KIT returned due to wrong address	Rs. 50
Bill Payments/ Re-charge	Free
Cash deposit charges	Free
Cash withdrawal charges	Free
Virtual Debit Card Issuance	Rs. 25

6 Benefits Of Opening A Savings Account

Money is a resource which if saved today, can benefit the future. It is the only saviour during medical emergencies and other urgent fund requirements. Nowadays, every process and facility require money for initiation and completion. Without having enough funds and savings, it is impossible to fulfil even daily necessities. Remain prepared for any circumstance with the help of adequate cash and face all difficulties easily.

Banks offer many services to their customers, one of which is a savings account. It helps secure all the assets and cash and provides interest on it. As a bank account holder, you can withdraw funds conveniently without the fear of loss or theft. Here are some of the benefits it offers:

1. Creates an emergency corpus: With a saving account, you can prepare yourself financially to face any unplanned emergency. Whether it is a broken major appliance, automobile repair, or medical emergency, you can always withdraw the funds from the account at any time as it offers lots of liquidity. The amount in the bank account is sufficient to cover the expenses and escape the hassle of borrowing. 
   
   
2. Asset protection: You can also opt for an online saving account opening to store your assets. They are free from any impact from market volatilities. For instance, if you invest funds in real estate, bonds, and stocks, there are chances of getting higher returns on the investment than bank accounts. But you risk losing money in unforeseen circumstances where you get lower returns which is not the case with bank accounts. 
   
   
3. Hassle-free operations: Technology has changed the scenario of every sector, including banking. Nowadays, smartphones have become the prime mode of payments and banking with compatible mobile banking apps. It offers 24/7 service and makes funds available at any time of the day.   
   
   
4. Easy bill payments: One of the greatest advantages of having an online bank account is the freedom to pay pending utility, mobile recharge, credit card, and water bills directly from the bank. You need to enter your bank account and card details on the provider’s website and pay the bill. You receive an SMS and email alert of the transaction on your registered mobile number and email ID. 
   
   
5. Minimal amount requirement: It has become very convenient to operate a bank account with the minimal amount required for opening it, which can be as low as Rs. 500.
   
   
6. International debit card: When you open a bank account, you get a kit from the bank containing the passbook, chequebook, a debit card for cash withdrawals at ATMs and other necessary documents. You can activate the facility for international transactions on your debit card.

 

5 Benefits Of Savings Account

Money is a resource which if saved today can benefit the future. It is the only saviour during medical emergencies and other urgent fund requirements. Nowadays, every process and facility requires money for initiation and completion. Without having enough funds and savings, it is impossible to fulfil even daily necessities. Remain prepared for any circumstance with the help of adequate cash and face all difficulties easily.

There are many services offered by banks to their customers, one of which is a savings account. It helps secure all the assets and cash of customers and offers them interest on it. They can also withdraw funds as per their convenience without the fear of loss or theft. Here are six benefits it provides:

1. Creates an emergency corpus: By online saving account opening, customers can prepare themselves financially to face any unplanned emergency during a financial crisis. Whether it is a broken major appliance, automobile repair, or medical emergency, they can always withdraw the funds from the account at any time as it offers lots of liquidity. The amount in the bank account is sufficient to cover the expenses and escape borrowing them from others.
   
   
2. Asset protection: The assets stored in a saving bank account is free from any impact from market volatilities. For instance, if people invest their funds in real estate, bonds and stocks, there are chances of getting higher returns on the investment than bank accounts. But they also risk losing money in unforeseen circumstances where they withdraw the money for a lower return or loss. There is no fear of forced withdrawal in a bank account.
   
   
3. International debit card: When individuals open a bank account, they get a kit from the bank containing the passbook, cheque book, a debit card for cash withdrawals at ATMs and other necessary documents.
   
   
4. Easy bill payments: One of the greatest advantages of having an online savings account is the freedom to pay pending utility, mobile recharge, credit card, and water bills directly from the bank. Customers must enter their bank account and card details on the website of the provider and pay the bill. They also receive an SMS and email alert of the transaction on their registered mobile number and email ID.
   
   
5. Hassle-free operations: Technology has changed the scenario of every sector, including banking. Nowadays, smartphones have become the prime mode of payments and banking with the help of a compatible mobile banking app. It offers 24*7 service and makes funds available at any time of the day. Users can download it and make emergency payments at a tap.

4 Banks Offering Online Saving Account Opening Facility In India

It is essential to earn and secure our future financially. People spend money to fulfil their desires and demands such as buying a house, a car, some gold and invest it in several financial products with secured and guaranteed returns. A penny saved today equals a penny earned for the future. It helps meet all emergency expenses and keep the funds safe and secure in bank accounts.

A savings account is the most remarkable financial product offered by several banks in India for customers to deposit their hard-earned money and relieve them from the burden of carrying it everywhere. They can also withdraw funds anytime and anywhere without any hassle from the ATM using the debit card linked to the account. The interest also gets deposited in it.

With so many options to open a bank account, it becomes challenging to choose which one of them is preferable. There are so many factors that determine the suitability, such as the interest rates offered, services, facilities, and much more. In India, multiple banks are offering various schemes to their customers to promote the habit of saving and investing. Here are popular ones offering this facility:

1. State Bank of India (SBI): It provides a wide range of banking products to the customers and is the largest bank in India. SBI saving bank account is one of the popular products in which individuals can deposit their money safely. When it comes to interest rates, the account offers exciting rates.
   
   
2. DBS Bank: It operates solely online. Opening an online savings account gives you higher interest rates as well. Download the app on the smartphone and fill the required details. With interest rate competitive, customers also get welcome benefits like INR 150 cashback on adding INR 10,000 in the bank account or spending INR 3,000 on the debit card.
   
   
3. Kotak Mahindra Bank: It has an extended range of facilities to help customers manage their money efficiently. They offer a fixed rate of interest on balance above INR 1 lakh. There are no transaction or monthly account fees to pay while opening an offline or online bank account. Individuals can choose an account that meets their needs from a range of options such as 811 Digital Bank Account, Edge Account, Sanman Account, Classic Bank Account, etc.
   
   
4. RBL Bank: It is one of the leading private banks of India that provides a wide range of banking products, including a mobile banking app. Customers can access the banking facilities from any corner of the world at any time. They also get higher interest rates along with zero balance facility.

How to Open Savings Bank Account both Online & Offline

Opening a savings account is always a good idea as it keeps your excess money safe, especially the ones which are not required for immediate use. Besides, opening a saving account helps to encourage saving money for the future. From a schoolchild to a senior citizen, anyone can open a savings bank account with a bank or any financial institution. It is on you to choose which bank you need to open an account with.
Features of having a savings account 

• Helps to promote savings
• No restrictions on the number of deposits
• Can withdraw either by a cheque or withdrawal slip. The facility has been made easier withdrawing using an ATM card.
• There is no validity period for a saving account.
• There should be a minimum amount for opening the account. Also, a minimum balance should be maintained based on which you earn interest. But these days, there are new banks that offer zero balance saving account, which comes with no maintenance of account balance.
• An online facility like mobile banking app is available for managing your savings account. With this, you can make any bill payment or fund transfers or pay household expenses. 

How to Open a Savings Account Offline
Due to the emergence of mobile banking and online facilities, it is much easier for the customer to open a savings account. But the high traffic or network issue creates server problems which at times becomes challenging for customers to complete the process. Also, who are not so tech-savvy, can follow the mentioned offsite steps –

• Research – Before opening an account, conduct proper research about banks and their interest rates. Select the one which fits your needs and offers high-interest rates.
• Documentation – For opening an account on savings, you need to bring a copy of your identity proof, two passport size photographs, address proof, income or employment proof (if required), and age proof to your nearest branch of the bank.
• Opening form – When you visit the bank, the representative takes care of the process. They provide you with an account opening form, which needs to be filled thoroughly. Submit the form with the copies of documents to the representative.
• Processing time – They then process the form. Based on the bank, the processing gets cleared and opened within one to 12 working days. 

Online Savings Account Opening – Steps to Follow
Online saving account opening is the best option and possible through online banking apps. It takes minutes and involves a hassle-free process.

• After researching different banks and their interest rates, choose the best one that fits your requirements.
• Log on to the respective bank website in which you wish to open an account. Not all bank accounts have an online bank account opening with zero balance.
• Fill in the online form, upload documents such as ID and address proofs.
• The back-end team of the bank verifies them, and you can begin operating the account within hours. 

Final verdict:
The best thing about saving account is there is one for every requirement.

6 Savings Account Charges To Consider Before Opening A Savings Account

A savings account not just inculcates a saving habit but is also useful for emergency purposes. However, many banks have limitations on the number of withdrawals. The volume of transactions made on the account comes with a fee. These charges vary from bank to bank. Sometimes, they vary depending on the type of account as well.

You should be aware of the mentioned charges before you open a savings account:

• Non-maintenance of balance: This is one of the most common penalties that banks levy. You receive interest depending on the minimum balance you maintain. These charges are usually minimal. For a regular savings account, the fees are anywhere between INR 100 to INR 350 per month. On the other hand, the premium account has higher charges. It can go up to INR 600 per month. So, carefully consider these charges before choosing the savings account.

• Cash transaction charges: Every bank allows only limited cash transaction. If you cross that limit, you have to pay the penalty. Most banks allow only five free cash transaction per month. Beyond that, you have to pay the necessary costs. Some banks have also placed caps on the value of the cash transaction per month. Premium accounts involve a higher limit on a cash

• Cheque book fee: Although online transactions are trending now, some places still accept only cheque as a means of finance. A standard cheque book, which banks offer for free at the beginning, contain 20-25 cheques. If you order a new one, you have to pay a minimal amount. If you have premium savings account with a high average balance, you need not worry about cheque book issuance charges.

• Debit card costs: When you open a bank account, you are given a welcome kit along that includes a debit card. So, banks levy issuance and maintenance charges as well for the same. Sometimes the costs change depending on the services the banks offer. Certain premium accounts provide free regular debit cards.

• NEFT & RTGS charges: The two most preferred mode of transactions in India are NEFT and RTGS. NEFT has no lower limit on fund transfer whereas RTGS has a limit of INR 2 lakh per transaction. However, the movement of funds is faster under RTGS and gets done real time, on an account to account basis. Banks have specific charges in place regarding NEFT and RTGS. Some banks waive off the costs for premium accounts.

• Cheque return fee: If the cheque issued bounces back, the concerned bank levies return charges. The return cheque charges will be higher than the ones released by the third party.

Before you open a savings account through app, remember these additional charges.

4 Types Of Savings Accounts For Investors

Saving accounts are some of the most common products offered by banks. Almost all banks offer several different types of accounts, from regular savings to zero balance accounts and minor to senior citizen accounts. All of these accounts come with various different features that are meant to suit the requirements of the account holder. As such, not all accounts are equal. A customer must select an account depending on his financial goals. Most customers open these accounts to enable them to save money and build their corpus. If you too are looking at saving money, you should invest in one or more of these accounts.

Basic/regular savings account: Almost every bank customer begins his savings journey with a regular savings account. This type of account is also known as a passbook account in which the customer can get a record of all the transactions done on the account. These types of accounts allow you to earn interest bi-annually on your savings. Customers can visit the bank periodically or keep a tab on this account by opting for internet banking. If you intend to keep you money in your regular account you should choose banks like Digi Bank by DBS or Kotak Mahindra Bank as they offer high interest rates.

Recurring savings accounts: Banks encourage customers to open a savings account, which is a specialized account known as recurring accounts. These accounts, also known as deposit accounts, allow you invest a specific amount that can be transferred from your regular account every month. This is one of the best ways of putting away a specific amount from your savings and is similar to your provident fund account. Unlike your PF or PPF (public provident fund) account, you can close this account anytime you please. It comes in handy in case of emergencies.

Online savings account: Customers, who prefer to conduct their banking transactions online, can also open savings account online. Digi Bank by DBS is one such online, paperless bank, which allows you to park your savings. It offers an interest rate of 7% on your savings, higher than any other bank in the country. With your online savings account, you can create fixed deposits from your savings at any time you please, while also being able to conduct several other online transactions. Also, you can earn higher interest rates as compared to traditional basic savings accounts.

Fixed deposit accounts: Customers, who have large savings and are dependent on income from those, can open a separate fixed deposit savings account, which pays you a monthly or quarterly interest depending upon your requirements. You can open this fixed deposit in any bank or financial institution of your choice. If you are not dependent on the income from your fixed deposits, you can opt to earn your interest cumulatively, at the end of the fixed deposit tenure.