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What is 'Savings account'
SAVINGS ACCOUNT
In this modern hustling world, every earning individual wants a safe place to store the earned money, and that’s where Saving Account comes into play.
WHAT IS A SAVINGS ACCOUNT?
It is a deposit account held with a bank to manage your savings, expenses, and investments. A standard transaction in a bank looks as follows- A deposits money in the bank as extra cash/loan/salary, then the bank gives the same amount to B on interest as a loan. Bank earns its money from the interest on the loan to B. It pays A the interest for the money that has been given to B.
INTEREST RATES
Almost all banks nowadays provide very modest interest rates on savings accounts ranging from 3-4%, but some private banks offer interest rates up to 6-7% vide condition that the account holder keeps a minimum balance of say 75k-1Lac.
Interest rate is variable, one day, it can be 6%, and the next, it can be 4%.
It is calculated every month and paid quarterly.
MINIMUM BALANCE REQUIREMENTS
Almost all accounts require you to maintain an average balance monthly/quarterly. There is no standard amount for every bank. It can vary from bank to bank and change over time.
The savings account holder will have to pay charges/fines if the minimum balance is not maintained.
ZERO BALANCE ACCOUNT
Many salary accounts, student accounts, and approved societies/apartments accounts are opened as zero balance accounts. The advantage of a zero balance account is that the minimum balance requirement is removed, and the savings account holder won’t have to pay any charges.
FACILITIES
There are many benefits of opening a savings account. Almost 90% of accounts in India are savings accounts. The account holder gets a checkbook, and they can pay by cheque. Cash can also be withdrawn using an ATM Card. Payment can be made using a Debit card at shopping centers/eateries.
Online banking can also be done, which is very efficient nowadays. Bank transfers using NEFT/RTGS/IMPS. Account balance and statements can be checked online. Online transactions are suggested for the safety and fast process, and one does not have to go somewhere physically.
SAVINGS ACCOUNT - FEATURES
CASH WITHDRAWAL AND DEPOSIT
Cash can be withdrawn using “Self” cheques or filling out the cash withdrawal form. Money can be withdrawn or deposited till a daily maximum limit. The limit can be crossed, but the account holder must quote the reason for the same.
WHO CAN OPEN A SAVINGS ACCOUNT?
WHO CANNOT OPEN A SAVINGS ACCOUNT?
CHARGES
There are no charges as such for a savings account, but whenever there is
Banks do charge some amount as a fine.
The fine amount varies from bank to bank.
SAVINGS ACCOUNT - PROS AND CONS
PROS
CONS
Do I have to pay tax on keeping money beyond the 0% tax slab?
No. There is no tax on keeping money beyond the 0% tax slab. You can keep any amount in your savings account.
What is the minimum amount of money I can deposit/keep in my Savings Account without paying taxes?
There is no limit. Your tax liability depends on your annual income. In a savings account, you can deposit from anywhere, maybe in the form of a loan, but there will be no tax for it.
What is the maximum amount I can deposit without giving PAN?
PAN is updated with all bank accounts. If you deposited beyond the specific minimum limit, say Rs. 50K, the bank may ask about the source of the cash.
Is there a limit on the number of online transactions- NEFT/RTGS/IMPS?
No, there is no limit on the number of online transactions, but some banks can charge fees for it. For example- Some banks charge Rs.5 on IMPS transactions. These charges can depend on the amount of the transaction. Suppose, if you do an RTGS transaction of 3-5 lacs, they can charge on the basis amount of the transaction.
How many savings account can an individual open?
There is no limit to that; you can open many savings accounts, but the problem is that if you open many savings accounts, it requires money to maintain a minimum balance. It would be best if you restricted yourself from opening many accounts. 2-3 accounts are more than sufficient.
How much money should I keep in a Savings Account?
You should keep at least four times your monthly expenses.
What happens if a bank fails? Is my money safe in the bank?
All your bank deposits (Savings, FD, RD, etc.) are insured for Rs. 1 Lac combined per bank per individual by DICGC ( Deposit Insurance and Credit Guarantee Corporation), a subsidiary of RBI.
Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.
In this modern hustling world, every earning individual wants a safe place to store the earned money, and that’s where Saving Account comes into play.
WHAT IS A SAVINGS ACCOUNT?
It is a deposit account held with a bank to manage your savings, expenses, and investments. A standard transaction in a bank looks as follows- A deposits money in the bank as extra cash/loan/salary, then the bank gives the same amount to B on interest as a loan. Bank earns its money from the interest on the loan to B. It pays A the interest for the money that has been given to B.
INTEREST RATES
Almost all banks nowadays provide very modest interest rates on savings accounts ranging from 3-4%, but some private banks offer interest rates up to 6-7% vide condition that the account holder keeps a minimum balance of say 75k-1Lac.
Interest rate is variable, one day, it can be 6%, and the next, it can be 4%.
It is calculated every month and paid quarterly.
MINIMUM BALANCE REQUIREMENTS
Almost all accounts require you to maintain an average balance monthly/quarterly. There is no standard amount for every bank. It can vary from bank to bank and change over time.
The savings account holder will have to pay charges/fines if the minimum balance is not maintained.
ZERO BALANCE ACCOUNT
Many salary accounts, student accounts, and approved societies/apartments accounts are opened as zero balance accounts. The advantage of a zero balance account is that the minimum balance requirement is removed, and the savings account holder won’t have to pay any charges.
FACILITIES
There are many benefits of opening a savings account. Almost 90% of accounts in India are savings accounts. The account holder gets a checkbook, and they can pay by cheque. Cash can also be withdrawn using an ATM Card. Payment can be made using a Debit card at shopping centers/eateries.
Online banking can also be done, which is very efficient nowadays. Bank transfers using NEFT/RTGS/IMPS. Account balance and statements can be checked online. Online transactions are suggested for the safety and fast process, and one does not have to go somewhere physically.
SAVINGS ACCOUNT - FEATURES
CASH WITHDRAWAL AND DEPOSIT
Cash can be withdrawn using “Self” cheques or filling out the cash withdrawal form. Money can be withdrawn or deposited till a daily maximum limit. The limit can be crossed, but the account holder must quote the reason for the same.
WHO CAN OPEN A SAVINGS ACCOUNT?
- Resident and Non-Resident Indian
- Associations, Societies, Education institutions, Trusts, etc.
- A minor under a guardian
WHO CANNOT OPEN A SAVINGS ACCOUNT?
- A company, partnership firm, or any business concern.
- Government Departments.
CHARGES
There are no charges as such for a savings account, but whenever there is
- A bounced cheque
- An amount below the minimum balance requirement
- Duplicate Statement
- DD/RTGS/NEFT/IMPS (in some banks)
Banks do charge some amount as a fine.
The fine amount varies from bank to bank.
SAVINGS ACCOUNT - PROS AND CONS
PROS
- Savings Account provides higher safety and security than cash.
- There is liquidity, and the amount can be deposited and withdrawn whenever in need. It’s better to keep money in gold, property, or the stock market, which takes time, and cash cannot be taken out immediately.
- You get to earn interest on idle/spare money.
- It is straightforward to operate with the help of cash, cheque, ATM/Debit cards, and online banking.
CONS
- It has a negligible interest rate which is less than the inflation. A savings account should not be treated as an investment, and it’s used to manage the expenses.
- Since there is more liquidity, there is a tendency for higher spending.
- It is not helpful for businesses since the transaction amount is limited per day/month.
Do I have to pay tax on keeping money beyond the 0% tax slab?
No. There is no tax on keeping money beyond the 0% tax slab. You can keep any amount in your savings account.
What is the minimum amount of money I can deposit/keep in my Savings Account without paying taxes?
There is no limit. Your tax liability depends on your annual income. In a savings account, you can deposit from anywhere, maybe in the form of a loan, but there will be no tax for it.
What is the maximum amount I can deposit without giving PAN?
PAN is updated with all bank accounts. If you deposited beyond the specific minimum limit, say Rs. 50K, the bank may ask about the source of the cash.
Is there a limit on the number of online transactions- NEFT/RTGS/IMPS?
No, there is no limit on the number of online transactions, but some banks can charge fees for it. For example- Some banks charge Rs.5 on IMPS transactions. These charges can depend on the amount of the transaction. Suppose, if you do an RTGS transaction of 3-5 lacs, they can charge on the basis amount of the transaction.
How many savings account can an individual open?
There is no limit to that; you can open many savings accounts, but the problem is that if you open many savings accounts, it requires money to maintain a minimum balance. It would be best if you restricted yourself from opening many accounts. 2-3 accounts are more than sufficient.
How much money should I keep in a Savings Account?
You should keep at least four times your monthly expenses.
What happens if a bank fails? Is my money safe in the bank?
All your bank deposits (Savings, FD, RD, etc.) are insured for Rs. 1 Lac combined per bank per individual by DICGC ( Deposit Insurance and Credit Guarantee Corporation), a subsidiary of RBI.
Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.
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