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Highest Saving Bank Interest Rates / Best Interest Rates on Savings Accounts - India 2012


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What are Saving Bank Accounts  / What are SB accounts / What are Saving Fund accounts:

 

Saving accounts are one of the most popular deposit accounts  for individuals in India.  In such accounts, the depositor is normally issued cheque books and the customer is allowed the flexibility of  deposits of any amount and withdrawal of funds from the account at any time.  Although, most of the banks have rules for the maximum number of withdrawals in a period and the maximum amount of withdrawal, yet no bank strictly enforces these owing to competition in the banking circles.   However, banks have every right to enforce such restrictions if it is felt that the account is being misused as a current account. (See below the features of Saving Bank accounts)

 

All PS Banks, Private Sectors (like SBI, PNB, BOB, ICICI Bank, Yes Bank, Kotak Bank etc.) have the facility of Saving Bank accounts and these are frequently used by salaried persons, pensioners, senior citizens and even by students and housewives.   These are the basic accounts used by public for savings and making payments by cheques.

 

 

Interest on Saving Accounts - Is it Regulated by RBI ?

 

Till 24/10/2011, the interest on Saving Fund accounts was regulated by RBI and it was 4.00% p.a. on daily balance basis.  However, wef 25th October, 2011, RBI has deregulated SF interest rates and banks are now free to decide the same within  certain conditions imposed by RBI. 

 

 

Which Banks Are Paying Maximum Interest Rates on Savings Accounts / Which Banks are paying Best Interest on Saving Accounts

 

Sometimes a question is asked as to which is the best bank for opening a Savings account ?  Frankly speaking there is no straight forward answer to this query, as all banks offer almost similar facilities to Savings Bank account holders i.e. allowing deposit and withdrawals with cheque book facilities.  However, the customer service and rate of interest varies from bank to bank and more so from Branch to Branch also. With ATM facilities you may need to go to bank only on rare occasions.  Therefore, now rate of interest is becoming a major deciding factor for opening a new account.

 

After deregulation by RBI of the Saving Bank interest, each bank is free to fix its rate of interest on Saving Funds.  On the very first day of deregultion, Yes Bank announced the increase of Saving Fund Interest from 4% to 6%.   The following are some of the banks which are offering  Best / Highest / Top / Maximum  Interest Rates on Savings Account

 

 

 

BANKS PAYING Best Rate of Interest on Savings Bank Accounts in India* / Highest Interest on Saving Accounts

 

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Name of the Bank / Institution Maximum Rate of Interest on Saving  Accounts (for balance upto Rs.1 lac)

 

Best Rate of Interest on Saving  Accounts (balance ABOVE  Rs.1 lac)

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Yes Bank 6.00% 7.00% 22/12/2011
Kotak Mahindera Bank 5.50% 6.00% 01/11/2011
IndusInd Bank 5.50% 6.00% 01/11/2011
The Ratnakar Bank 5.50% 5.50% 01/11/2011
       

 

  (The readers are advised to check on the website of the respective banks before decide to go for opening a new account, as banks can change the rate of interest any time without informing our website).

* updated on 04/08/2012

 

 

Click Here for :  Highest FD Rates of Banks in India

 

 

TDS on Savings Bank Accounts.  TDS on Interest Income in Saving Accounts.  Why TDS is not deducted by banks on Saving Bank Interest?  

 

TDS is not applicable on the interest paid on savings bank accounts.  (Remember, this does NOT mean that whole interest earned these account is tax free!).   Under Section 194 (3) (vii), TDS is not applicable on interest earned on bank deposits other than time deposits.   The subsection (3) (vii) reads as follows : The provision of sub-section (1) shall not apply to such income credited or paid in respect of deposits (other than time deposits made on or after 1st day of July, 1995), with a banking company to which the BR Act 1949 (10 of 1949) applies including any bank of banking institution referred in Section 51 of that Act.    Since Saving Bank accounts are demand deposits (and not the time deposit) as per BR Act 1949, the interest earned on savings bank account is not subject to TDS.

 

 

Whether Saving Bank Interest is Tax Free ? Tax Free Saving Account Limit 2013

 

No saving bank interest is not tax free.  However, from the FY 2012-13, no tax is payable on interest earned on Saving Bank accounts upto Rs10,000/- per year.   Thus, now interest earnings on savings bank accounts upto Rs10,000/-, are exempted from Income Tax.

 

 

Major Features of Saving Bank Accounts :

 

    (a) Major objective of  saving account is to promote savings by the public
  • (b) In saving fund accounts, banks do not put any restriction on the number of times you can deposit funds or the amount of deposits, except in recently introduced no-frill accounts etc.
  • (c) Withdrawals are allowed subject to certain restrictions, but here too the rules are not strictly insisted upon by banks.
  • (d) The money can be withdrawn either by cheque or withdrawal slip of the respective bank.
  • (e) Now the rate of interest payable has been deregulated and is between 4% to 7% p.a
  • (f) There is  NO maturity date for saving bank accounts as these are of continuing nature.
  • (g) Some banks insist on a minimum balance / minimum quarterly balance in these accounts.  However, now a days banks also open Zero Balance and No Frill accounts where there are no requirements of minimum balance.
  • (h) Banks allow the saving bank holders the facility of  paying electricity bill, telephone bill and other regular monthly payments through ECS etc.
  • (i) Customers are also encouraged to give mandate for debit of Saving Bank accounts for  EMI payments for housing loan, personal loan, car loan, etc.,
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