A savings account is a type of account that banks mostly offer that provides you a safe place to store all your money and earn compound interest. It is a basic type of account that allows us to deposit and withdraw money, and the banks pay us compound interest on the balance we have.
If you don’t have a savings account, go fast and GET one. We have listed a few banks’ names based on savings account interest rates to make it easy for you.
Kotak Mahindra Bank
State bank of India
Today in this article, we will learn about the purpose and the tax implications of a savings account.
Benefits of a Savings Account
Listed below are the benefits of holding a savings account.
One of the main benefits of opening a savings account is liquidity. You can have full access to your money, and the best thing is, you can withdraw your money from any corner of the world. When you open a savings account, you get a debit card, which you can use to pay electricity bills, shopping bills, and many more.
Your money is safe with banks, and the Reserve bank has strict guidelines to ensure the safety of the money. Another best thing is, you can claim up to Rs. 1 lac of insurance if something happens to your money at the time of deposit.
Helps you Get A Loan
If you maintain a good healthy relationship with the bank and deposit money regularly, it will be a useful practice. Then there are high chances that you can get a loan of up to Rs. 5 lakh based on your transaction easily.
Helps With Your Income Tax Returns
We all know that our income gets credited to our savings account. So, it will be very easy for you to calculate your gross annual income. You don’t have to spend hours banging your head with calculations. Moreover, you can download your bank account statement for income proof while filing your income tax return.
Enables Instant Payment Services
You can use your debit card to pay for your purchase anytime and anywhere. You can also link your debit card with your UPI ID and transfer money to another account within a few minutes.
Tax Implication of A Savings Account
The amount deposited on your savings account is not taxable, but the interest that you earned on that amount is. As per the Income Tax Act, the interest you earn from your savings account is taxable, irrespective of the savings account interest rate. It comes under the head’s income from other sources.
As per section 80TTA, the interest you earn from your savings account is deducted up to Rs 10,000 per financial year. Hindu undivided families can claim this deduction, and it is valid on interest earned from all the savings accounts held in the post office cooperative bank. Interest earned above 10,000 from any of these sources is taxable.