Savings account questions
Interest calculation, minimum balance penalties, sweep facilities and tax on savings interest.
How is savings account interest calculated?
On the daily closing balance, credited quarterly by most banks. Slab-rate accounts pay a higher rate only on the balance above a stated threshold.
What happens if I miss the minimum balance?
Banks levy a monthly penalty, commonly Rs 100 to Rs 600 depending on account variant and city. A zero-balance or salary account avoids the charge entirely.
Is savings interest taxable?
Yes, at slab rate. Section 80TTA allows a deduction of up to Rs 10,000 of savings interest under the old regime, and 80TTB allows Rs 50,000 for senior citizens including deposit interest.
What is a sweep-in facility?
Balance above a set threshold is automatically moved into a fixed deposit at a higher rate and swept back when you need it, giving deposit-level interest with account-level liquidity.
How many free ATM transactions do I get?
RBI mandates at least five free transactions a month at your own bank's ATMs, and three (metro) or five (non-metro) at other banks. Beyond that a per-transaction fee applies.
Should I keep an emergency fund in a savings account?
Keep one to two months of expenses in the account for instant access and the rest in a sweep-in deposit or liquid fund, which pays more while remaining reachable within a day.