Introduction to Savings Bank Account:-
A savings bank account is the most basic type of account at a bank allowing you to deposit money, keep it safe, and withdraw money as needed. Savings bank accounts typically pay interest on your deposits, but interest rates are moderate on these accounts.
Savings bank accounts generally are opened to keep money that you don’t intend to use for daily or regular expenses.
You can make an unlimited number of cash withdrawals from your savings account at an ATM.
Banks may also charge fees unless you maintain a certain average monthly balance in the account.
Purpose of a Savings Bank Account:-
It’s wise to have a savings bank account. Without a savings account, where are you going to keep money that you don’t plan to spend in near future? It’s not safe to hold cash. Also, it’s tempting to spend money that you’ve got in-hand, so a savings bank account helps you set funds aside and reach your goals.
Broadly, the two big benefits of savings accounts are safety and growth. But there are also some other benefits of savings bank account. They are as follows:-
1] Guaranteed Interest Rates –
Up to 25th October 2011, the interest rates were fixed by the RBI and had to be same for the all the savings bank accounts across all banks. But after that RBI deregulated the interest rates on savings bank account. Thus, the banks were free to determine the interest rates on the capital in a savings bank account. In both the cases, interest rates for balance above Rs. 1 lakh varied.
You gain interest on your money over time with a savings bank account. That means you have more earning potential with your money in a savings bank account as compared to keeping it in a safe at home.
Currently, banks are offering interests at around 3.5-4% for balance up to Rs. 1 lakh.
2] High Liquidity –
One of the primary benefits of savings account is its liquidity. Savings accounts offer easy access to your cash. This is also known as liquidity, or the ability to make a withdrawal quickly and easily. Once you’re ready to spend money, you can withdraw cash, make a payment by check, pay by debit card, or make an electronic funds transfer.
You can easily access your money deposited in your savings bank account in case of an emergency. Withdrawing money from a savings account is as easy as it can be. The savings account allows an easy access to your deposited money whenever required. You can withdraw your money as often as you like using an ATM. Savings bank account helps to use funds much easily when compared to taking money out of stocks, bonds or certificates of deposits, which results in penalties.
Post demonetization, the daily cash withdrawal amount from ATM’s has been increased from Rs.4,500 to Rs.10,000. Banks offer 3 to 5 number of free withdrawals beyond which they may charge some fees per withdrawal. The number of free withdrawals and the fees after exceeding the free withdrawal limit changes from bank to bank.
Interest from savings bank account is tax-deductible to a certain extent. But they are shown under income from other sources.
Under section 80TTA, for an individual or HUF, interest earned up to Rs 10,000 in a financial year is exempt from tax. The deduction is allowed on interest income earned from savings account with a bank, with a co-operative society or with a post office.
Interest that gets accumulated in your savings bank account above the amount of Rs. 10,000 must be declared in your tax return under the head income from other sources. This interest will be treated as income and taxed as per the applicable I-T tax slab rates. Also, no TDS is deducted on savings bank interest.
4] On the Move Banking –
One can access their bank account through their registered mobile-phone number with their bank. The features offered in mobile banking are of two types: first for account updates on mobile phones and secondly for doing money transfers and other services.
Most banks provide their account holders with an online access to their money 24 hours a day. Being able to access your funds when you need is one of the biggest benefits of a savings account. You can opt for an online transfer if you need to pay someone from your savings account and complete it in seconds online through NEFT, IMPS, UPI and RTGS facilities.
Banks also have mobile-banking interface. You can download the application of your bank and do different kinds of transactions on your mobile. You can also use net banking facility made available by the banks on their websites through laptops and PC’s.