Saving money was never easy. Well, financial experts have always advised saving for an eventuality, but they would never have anticipated that a pandemic like Novel Coronavirus could also be included in the ‘rainy day’ category.
Today, millions of people have lost out on their jobs and are living off the little saving they have been making all these years to meet their financial goals such as a wedding, a home renovation, a vacation abroad, to purchase a dream car or the retirement years ahead.
All these years, the banking system has been catering to people of all age groups with various types of savings accounts and since the pandemic has struck, it has come up with a number of schemes for all categories of savers.
No doubt, a savings account is one of the traditional and conservative investment options but it also has its set of benefits such as no risk of losing money and at the same time earning a marginal interest on the deposits. But, despite having so many options to open a savings account, there remains one question among all, i.e., do I have to pay taxes on bank account interest.
However, before getting the answer to this, let us first check out some of the common savings accounts that could match our needs for future eventualities.
Types of Savings Accounts
- Regular savings account: This account allows limited cash withdrawals and limited transfer facilities. The customers are required to maintain a minimum deposit all the while and they do not have the facility to overdraw.
- Salary savings account: It is an account in which an employer deposits a fixed amount of money or ‘salary’ in an employee’s account every month. It is a zero balance account and the account holder receives no interest. However, if the salary is not credited in the Salary Account for three successive months, then the account automatically gets converted into a regular savings account.
- Senior citizen savings account: The elderly persons can enjoy a lot of privileges such as a higher withdrawal limit, shopping limit, better interest rates, and discounts on locker services. Some banks also extend special medical cards or health cards to senior account holders.
- Children savings account: It is an account for children below 18 years of age. It helps in accumulating money for a minor’s future. It could be to fund the child’s college fee abroad, educational trips, marriage, or anything else. Once the minor turns 18, the account can either be closed or converted into a regular savings account.
- Women’s savings account: These types of savings accounts come with benefits such as cashback offers, preferential interest rates on loans, lower processing fees on loans, and other charges that regular accounts don’t offer. Some banks also offer complimentary personal accident insurance for women account holders.
Tax Benefits on Saving Account Interest:
Now moving ahead, let’s get a clear understanding regarding ‘Do I have to pay taxes on bank account interest’. No matter what type of saving account you prefer to open, you’ll definitely earn some interest on the deposit balance.
However, as per Section 80TTA of the Income Tax Act, you can enjoy tax deductions of up to Rs.10000 on interest earned from the savings account. Interest earned is deductible under the head’s income from other sources. Although, interest accrues beyond Rs.10000 are taxable.