Savings Accounts are a fundamental component of personal finance. These accounts offer a secure way to store your money. They also let you make interest on your savings. Here is an overview of Savings Accounts and the tax implications associated with the interest you earn on the funds in your account.
About Savings Accounts
A Bank Account refers to an account that lets you safely deposit your savings. In addition, it also enables you to earn a modest interest at a specified rate.
Benefits
Savings Accounts offer multiple advantages. This makes them an essential part of financial planning. The key benefits of such an account include the following:
- The RBI regulates banks in India. Hence, you can safely deposit and store your savings in such an account.
- You can earn Savings Account interest rates. This enables you to grow the money you deposit.
- They provide easy access to your money when required. This makes them a suitable vault for emergency funds.
- You can use the money in your account to transfer funds to payees globally.
- Such an account lets you register your billers and pay your utility bills on time.
- It offers access to a Debit Card and Online Banking platforms.
- You can use the funds to open Term Deposits.
- The transactions from this account can also determine your creditworthiness.
Steps to Open an Account
You can visit the branch of your preferred bank to open an account. Alternatively, you can conveniently open a Savings Account using the Banking app or website.
How Do You Earn Interest on the Account?
Earning interest on your Savings Account is simple. Banks calculate the interest daily. It depends on the closing balance every day. However, it is paid out monthly, quarterly, or half-yearly. The interest rates may vary across banks. It could also depend on your account balance.
Tax Implications
Once you complete the online Savings Account opening, you can start depositing funds and enjoy the benefits offered by your account. The money you deposit starts accumulating interest. When filing your Income Tax Return, you must declare the total interest you earn on the funds in the account. Banks do not deduct TDS on the interest. Instead, the interest income is taxable according to your applicable income tax slab rates.
However, u/s 80TTA of the IT Act, interest income up to Rs. 10,000 you earn from all your Savings Accounts annually is not taxable. This deduction is only available to individuals and HUFs.
Conclusion
Savings Accounts offer a secure way to save money and earn interest. However, you should know the tax implications to make the most of your money and comply with the tax regulations.
