Banking Awareness : Taxation of Savings Bank Interest rates
Taxation of Savings Bank Interest rates
Unlike interest on fixed deposits, interest earned on savings bank accounts is not subject to Tax Deduction at Source. However, this does not mean the interest earned on Savings accounts is completely tax free. It is exempted upto Rs. 10,000 in a year, and if the interest you earn from Savings accounts crosses this threshold, it becomes subject to tax.
Some points related to Interest Rates on Bank Accounts
1) Interest on Savings Account is calculated on daily balance basis.
2) Now, All Scheduled Commercial Banks (Excluding RRBs) have the discretion to offer differential interest rates based on whether the term deposits are with or without premature-withdrawal-facility, subject to the following guidelines:
- All term deposits of individuals (held singly or jointly) of 15 lakh and below should, necessarily, have premature withdrawal facility.
- For all term deposits other than (i) above, banks can offer deposits without the option of premature withdrawal as well.
- Banks should disclose in advance the schedule of interest rates payable on deposits i.e. all deposits mobilized by banks should be strictly in conformity with the published schedule
The nomination facility is available for all deposit accounts. Nomination is optional for account holders. The name of the nominee will be recorded in the pass book / statement of account / term deposit receipt only at the request of the account holder. The bank will close your account within three working days of receiving your instructions.
When there has been no financial activity for two years of time, other than posting of interest, an account can be classified as dormant. Statute of limitations usually does not apply to dormant accounts and funds can be claimed by the owner or beneficiary at any time.