In today’s era, almost everyone has a savings account for their money. Many people think these accounts are just for safeguarding funds, but there’s much more to them. Here are 10 important things about savings accounts that everyone should know.
Secure Storage for Money
A savings account allows you to store your money safely and access it whenever needed. Keeping money at home poses the risk of theft or loss, while a bank safeguards your funds.
Facilitate Transactions
You can send and receive money through your savings account, making transactions convenient and efficient without needing to withdraw cash.
Bill Payments
Pay various bills directly from your savings account via net banking, debit card, UPI, or cheque. This includes rent, utilities, internet, mobile bills, and other purchases.
Expense Tracking
Your savings account statement provides a detailed record of all transactions, helping you monitor spending and plan future expenses effectively.
Minimum Balance Requirement
Most savings accounts require maintaining a minimum balance, failing which the bank may charge a fee. The required balance varies by bank and is typically calculated monthly.
Minimum Balance Calculation
The minimum balance is calculated based on the average balance throughout the month, not daily. For example, maintaining a balance of Rs 10,000 most days and depositing Rs 300,000 for one day will result in a monthly average balance of Rs 10,000.
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Earn Interest
Savings accounts accrue interest on your balance, usually around 3-4 per cent. While this interest is modest, it is a benefit over keeping your money at home.
Fixed Deposits (FDs)
If you plan to keep money in your savings account for a long time, consider investing in a fixed deposit (FD) to earn higher interest. However, withdrawing the FD before its maturity may incur a penalty.
Taxable Interest
The interest earned on your savings account is subject to tax, with the rate depending on your tax bracket. It’s important to remember that this interest is not entirely tax-free.
Tax Exemption on Interest
Under Section 80TTA, interest earned up to Rs 10,000 from a savings account is tax-exempt. You only pay tax on interest exceeding this amount, providing some relief for small savers.