Savings accounts are designed to encourage more savings, unlike current accounts which allow unlimited transactions and do not offer any interest. An individual who has a steady income for example salaried employees can benefit from savings accounts. Also, people who have set short term goals like a holiday, or wedding or vehicle purchase etc. can also benefit from savings accounts. Almost every bank offers the facility of savings and current accounts. The leading banks that offer these facilities are HDFC Bank, Kotak Mahindra Bank, ICICI Bank, Yes Bank, Axis Bank, IndusInd etc.
Savings Account-Bank Deposits
A savings account differs from a current account in many ways. Banks allow a limited number of transactions per month to a savings account holder. Usually, the first five transactions are free. The interest rate charged on a savings account ranges from 4-6%. Because of the limited number of transactions, the account holder can save a greater amount over a period of time
Benefits of Savings Account
By offering ready to access cash at all times, let us see how banks have made savings account, a deposit one can never be without.
- Serves the purpose –The main purpose of having a savings account is to keep our money safe. A savings account helps you keep a part of your regular income safe from other expenses. It motivates you to save more and also helps you achieve certain goals such as a wedding, a family vacation, purchase of a car etc
- Earn interest –The topmost benefit for which people open a savings account is the interest earned on savings. Banks calculate the interest by multiplying the rate of interest to the money deposited in your account. This interest rate constantly changes from time to time.
- Your money is safe –Any savings account facility offered by bank or government institutions is always safe. These are closely regulated so you can trust and feel confident that the money is in safe hands.
- Easy access to money – One can easily withdraw money from a savings account when required. Banks and financial institutions now provide online access to savings account. One can also transfer money or make payments online.
- No risk – A savings account has a limitation of a certain amount of interest but what acts as a major benefit is the zero risk involved in it.
- Discounts on locker –If an account holder maintains the minimum quarterly balance in his account, banks provide a discount of 15-30% in his locker fee.
- Insurance – Many banks provide insurance cover, accident treatment expenses, and death cover when you open a savings account.
- Discount on gold – If a customer has been maintaining large balances in the savings account, the bank offers a rebate of 2-5% while purchasing gold coins from the bank.
- International Debit Card – A customer having a debit card for a savings account in a particular bank can convert it into an international debit card to carry out transactions abroad.
Tax implications
- The interest that you receive from a savings account is taxable under the head “Income from other sources”.
- Further, Section 80TTA provides for a deduction up to Rs 10,000 on such interest income and therefore, interest earned beyond Rs 10,000 only is taxable.