How to Calculate Interest on a Savings Account?

Savings Account is the most common type of bank account in India. Apart from keeping the savings protected in a bank and withdrawal flexibility, it also rewards account holders with interest income. So, you generate additional income simply by keeping your savings deposited in the account.

But how is interest calculated on Savings Account?

Here’s everything you should know-

Savings Account and Interest Rates

The interest income from a Savings Account depends on the interest rate fixed by the bank and the balance you maintain in the account. So, if you’re looking to open an Instant Savings Account online, you can choose AU Small Finance Bank that offers high interest rates on Savings Account.

How does a bank Calculate Interest Rate on Savings Accounts?

As per the RBI guidelines, banks must calculate interest on a Savings Account every day depending on the closing balance available in the account.

But while the interest is calculated daily, most banks generally credit the interest amount on a quarterly or half-yearly basis. However, at AU Small Finance Bank, you receive Monthly Interest Payouts if you open an AU Savings Account.

Savings Account Interest Calculation Formula

A Savings Account generates compound interest. In other words, the interest you earn from your Savings Account also earns interest if you maintain the same balance and don’t withdraw the interest income.

Here’s the formula for Savings Account interest calculation -

Interest Calculation

Let’s assume that you open an instant online Savings Account that offers a monthly interest payout with an interest rate of 3.50% p.a. If, for the first month (30 days), you maintain a balance of Rs. 90,000, here’s how the interest will be calculated-

Savings Account Interest = 90,000 *30 * (3.5%/100) / 365 = Rs 259

Ways to Earn More Interest on Savings Account

• Compare the interest rates thoroughly when choosing a bank for your Savings Account
• Save diligently to try and maintain a higher monthly balance in your Savings Account
• Choose the right type of Savings Account with benefits that match your banking needs

Monthly Interest Payout on Savings Account

With an instant Savings Account opening at AU Small Finance Bank, you can receive Monthly Interest Payouts. The Monthly Interest Payout facility encourages customers to save more and gives them early access to their interest income.

TDS on Savings Account Interest

Banks do not deduct TDS (Tax Deducted at Source) on Savings Account interest. As per the tax laws, the interest from Savings Account is tax-exempt up to Rs. 10,000 in a financial year. The limit applies to the sum of interests generated from all the Savings Accounts an individual holds. Any interest amount above the Rs. 10,000 limit should be reported as “Income from Other Sources” while filing tax returns.

High Interest Rate with AU Savings Account

AU Small Finance Bank, India’s best Small Finance Bank, offers high Savings Account interest rates with Monthly Interest Payouts. You can choose from different types of Savings Accounts as per your needs. Moreover, with features like AU 0101 App/NetBanking, Video Banking, WhatsApp Banking, and more, AU Small Finance Bank makes your banking experience highly convenient and rewarding.

FAQs

1. Is it Better to Receive Interest Annually or Monthly?

A Monthly Interest Payout is an excellent way to supplement your income. Moreover, thanks to compounding, monthly payouts can also help you generate higher returns than annual payouts.

2. Which Bank Gives the Most Interest on Savings?

AU Small Finance Bank offers Savings Account with highest interest rates in India. If you’re looking for a new Savings Account, use an online Savings Account interest rate calculator to see how higher interest rates can help you grow your savings.

3. How Do I Increase the Interest Rate on My Savings Account?

To increase the Savings Account interest rate, switch to AU Small Finance Bank, which offers highly competitive interest rates. In addition, with the bank’s online account opening facility, you can open a new Savings Account from the comforts of your home.