Savings Account Interest

Banking

Savings account interest in India ranges from 2.5-7% per annum depending on the bank. Large PSU banks pay lower rates (2.7-4%), small finance banks pay highest (5-7%). Interest is credited quarterly and is taxable as income. For balances above Rs 10,000, consider liquid funds for better yield.

In detail

Savings account rates comparison (2024):nSBI, Bank of Baroda: 2.7-3% (below Rs 10L), 3.5% (above Rs 10L)nHDFC, ICICI: 3-3.5%nKotak Mahindra: 3.5-4% (ActivMoney: up to 6.5%)nDCB Bank: 4-6% depending on balancenSmall finance banks (Unity, Suryoday): 5-7.5%nnTax: savings account interest above Rs 10,000/year taxed at slab (Section 80TTA provides Rs 10K deduction for non-seniors, Rs 50K for seniors under 80TTB).nnLiquid fund comparison: most liquid funds yield 6.5-7.5% with T+1 redemption -- better than savings accounts for any amount above emergency needs.

Formula

Annual savings interest = Average balance x Interest ratenTax saving: Section 80TTA exempts first Rs 10,000 savings interest for individuals below 60

Real-life example

🇮🇳 India example

Anita maintains Rs 2L average in savings account at 3.5% = Rs 7,000 interest. Below Rs 10K, so no tax. If she puts Rs 1L in liquid fund (7.2%) and keeps Rs 1L in savings: liquid fund earns Rs 7,200 + savings Rs 3,500 = Rs 10,700. More income with same liquidity.

Frequently asked questions

Should I keep all emergency fund in savings account or liquid fund? ▼

Split: keep 1 month expenses in savings account (instant access, zero redemption time). Keep remaining 5 months in liquid fund (T+1 redemption, 6.5-7.5% return). This captures the best of both: instant liquidity for day-1 emergencies + higher yield for the bulk of the emergency fund.