It is an account opened in any of the private or public sector banks, and other financial institutions with an intention to earn a monetary return for the funds that will be set aside periodically. This account allows customers to allot a portion of their income for any emergency requirement in the future as an investment with returns. This account basically inculcates the habit of saving especially for individuals with a fixed income like a salaried income.

A Savings Account does not have a maturity date. Since you have the convenience to withdraw the amount whenever necessary, this is the best way to keep aside surplus funds which will be available for any emergencies.

There are numerous facilities given to a Savings Account holder. These facilities differ from bank to bank. The facilities include depositing and withdrawal of amounts using a cheque, online banking, ATMs, sweep- in and sweep-out facility to fixed deposit and special loan offers.

The interest rates are comparatively lower than the rates offered for term deposits, but the easy access to the funds in times of need is the biggest advantage.

The money deposited in the Savings Account is used by banks to lend to borrowers who pay interest on the money borrowed. After paying for various costs, banks pay interest on the Savings Account to attract new customers and to retain the existing ones. The surplus funds available after paying for various costs and interest on the Savings Account will be the profit for the banks.

In the past, before Reserve Bank of India (RBI) deregulated the interest rates, all banks were offering 4% interest on Savings Accounts. During the year 2011, RBI brought about changes and banks were free to decide the rate of interest on Savings Account. Presently the rate of interest offered on Savings Account ranges from 3.5% to 7%.

Listed below are the different types of Savings Accounts that banks offer. The difference lies in the services, interest rates, minimum balance, and eligibility criteria associated with these accounts. 

• Regular Savings Account: It is an account that comes with a requirement of maintaining a minimum balance. However, it does not require the account holder to deposit a minimum sum of money periodically. There are no limitations on withdrawal either and one can withdraw money as per the daily limits specified. It earns you an interest which is calculated as per bank rates on an every day basis.

• Salary Savings Account: This account is opened under an arrangement with a corporate/government organisation to deposit the monthly salary of its employees. Salary Accounts offer multiple benefits such as it is a zero balance account and comes with services from the bank's relationship manager. However, this account gets converted to a regular Savings Account if there is no salary credited for three consecutive months.

• Children and Minors Savings Account: Created especially to encourage the habit of saving in children, these accounts can be opened at a young age under the guardianship of the child's parents or their legal guardians. This account does not have any requirement of maintaining a minimum balance.

• Senior Citizen Savings Account: Meant only for senior citizens, these accounts offer special benefits to the holders, especially a high rate of interest. These Savings Account can be easily linked to a senior account holder's retirement/pension funds for ease of management.

• Women Savings Account: These accounts are aimed at facilitating women entrepreneurs and occasionally offer lucrative schemes especially for them in addition to the regular features of a Savings Account. Through these accounts it often becomes easier for women entrepreneurs to get high loans for business or other activities.

Here are the details on interest rates and minimum deposits required in a Savings Account across different banks in India:

The general eligibility criteria for opening Savings Account are:

• Resident Individuals can open either individual or joint account
• Hindu Undivided Families (HuUF) can open Savings Account
• Foreign Nationals residing in India are eligible to open a Savings Account. Foreign nationals should be residing in India for a period greater than 180 days and must possess a valid passport, visa, Foreign Region Registration Office Certificate, and a Residential Permit.
• Minor above the age of 10 years are eligible to open a self-operated minor account and an ATM/Debit card can be issued to the Minor.
• A minimum balance as stipulated by respective banks has to be maintained. Penal charges will be levied for non-maintenance of minimum balance if the balance in the account goes below the stipulated amount at any point in time.

The list of documents that are accepted as proof of address, proof of identity, proof of relationship, and proof of age is detailed below. A copy of each has to be submitted along with the original document. The copies of the documents will be verified with the originals for authenticity.

• Two recent photographs (passport size) of the applicant
• Duly filled application for opening Savings Account
• Proof of residential address: Utility Bills of at least 3 months, Driving Licence, Passport, Property Tax Receipt
• Photo ID proof: PAN Card, Voter' ID, Driving Licence
• Aadhaar Card
• A letter issued by a gazetted officer along with a duly attested photograph of the person or the Photo Identity Card issued by Public Sector Undertakings, State/Central Government Departments, Statutory/Regulatory Authorities and Scheduled Commercial Banks. The letter and Identity card issued to permanent employees only are accepted as a valid proof to open the account.

Interest is calculated on the average balance in the account on a daily basis.

Though the interest is calculated on a daily basis, the interest will be credited to the account either on a monthly, quarterly, half-yearly, or quarterly basis.

The calculation of interest on Savings Account on a daily basis is based on the formula given below:

Interest = Amount (daily balance)*(Number of days)*Interest/days in the year

For example, Mr. X has a balance of 50,000 from the 1^st of January to the 15^th of January and he withdraws an amount of 10,000 on the 16^th of January and deposits an amount of 20,000 on the 17^th of January. The interest is calculated as below:

• Interest on 50,000 for 15 days
• Interest on 40,000 for 1 day
• Interest on 60,000 for 15 days

Let us assume the rate of interest is 4%

• Interest upto 15^th of January = 50,000 x 15 x 4/(100 x 365) = 82
• Interest on 16^th of January = 40,000 x 1 x 4/(100x365) = 16
• Interest from 17^th January to 31^st January = 60,000 x 15 x 4/(100x365) = 99

Total interest earned for the month of January calculated on a daily basis  is 197.

The interest earned on Savings Account to the extent of 10,000 is not taxable as per Section 80TTA of the Income Tax Act 1961.

Above the said amount, if you earn any interest, then it will be added to your gross total income and you will have to pay tax as per the tax slabs.

TDS is not deducted on Savings Account interest, unlike fixed deposit. The investor has to declare the interest earned on all the Savings Account, like a Savings Bank Account, Post Office Savings Account and Savings Account at co-operative banks and then pay the tax as per the tax slabs, if eligible.

The following are the benefits of having a Savings Account:

• A Savings Account does not have a maturity date and you can continue to operate the account as long as you wish to.
• A Savings Account inculcates saving habit. It is suitable for individuals with a fixed income.
• Allows earning a nominal interest on your surplus funds without blocking the funds
• While Savings Account comes with a minimum balance requirement, some of the Savings Accounts like salary accounts can also be zero balance accounts.
• A Savings Account does not come with any maximum term period and is a continuing account which can be maintained as long as you desire.
• The savings bank passbook often works as a residential and ID proof for many

The following are the charges related to a Savings Account:

• For non-maintenance of minimum balance: 150 to 300
• ATM withdrawal from other banks: Nil charges for 3 to 4 transactions. Beyond free transactions 10 to 20 per transaction.
• Cash withdrawal from same bank ATM: Nil charges for 3 to 5 transactions. Beyond free transactions 8 to 10 per transaction.
• Cash transactions from same bank branch: Nil charges up to 3 transactions and beyond 3 transactions, 150 per transaction.

The following are the facilities related to Savings Account

• Savings Accounts come with features like quick links of bill payment, phone recharge, and instant transfer of funds through internet banking.
• Payments can be made through NEFT, RTGS, and online banking
• Attractive offers available from banks from time to time for Savings Account customers like reward points on shopping, online payments, etc., that can be redeemed later.
• Preferential loan offers to customers with a good track record

Who can open a Savings Account?

A Savings Account can be opened by individuals residing in India. Hindu Undivided Family (HUF) with a separate PAN can also open the account. Minors above 10 years can open a self-operated Savings Account.

Can a nominee be added to a Savings Account?

Yes, a nominee can be added to either an individual Savings Account or a Savings Account held jointly. A nominee can be any family member, friend or any trustworthy person above 18 years. If the nominee is a minor, he or she has to be represented by a guardian.

Is interest on Savings Account taxable?

Interest on Savings Account up to 10,000 is exempted from tax under Section 80TTA.

How to deposit and withdraw funds from a Savings Account?

You can deposit money by visiting a branch or transfer funds online or have a part of your pay automatically credited to your Savings Account.

You can withdraw funds by visiting a branch or use an ATM. You can also transfer funds from this account to any other account online.

What is the average monthly balance?

Average monthly balance is the minimum amount that has to be maintained in the account. If the minimum amount is not maintained, a penal charge will be collected.

When will the interest earned be credited to the account?

The interest earned will be credited to the account on a half-yearly basis. However, the interest will be calculated on an average daily basis or on a monthly basis.

When does the Savings Account become dormant?

The account will become dormant if the customer does not initiate any type of transactions like withdrawal of cash either from ATM or at the branch, transfer of funds, etc., for a continuous period of 2 years.

Is internet banking facility available for Savings Account?

Yes, internet banking facility is available for Savings Account and you can do almost all the transactions online through internet banking or through a customised app of your bank.

Are there any charges for ATM card linked to Savings Account?

The charges differ from bank to bank. Some banks issue the card free of cost for the first time. Only replacement cards will be charged. Whereas some banks do charge for issuing the card for the first time also.

How to check the savings bank account balance?

The account balance can be checked through internet banking or through a customised app of the bank or by visiting any bank branch or ATM.

• April 2019: SBI to link its key pricing decision for savings bank deposits to the repo rate of the Reserve Bank of India with effect from May 1, 2019.

• May 2019: SBI and its peer banks HDFC and ICICI bank to levy a penalty to the tune of 5 to 600 for non-maintenance of minimum balance in the account.

• May 2019: BSBD Accounts of SBI and HDFC Bank earn interest at the same rate as any other normal savings bank accounts.