Savings Account Interest Calculator — India

Q: How do banks calculate savings account interest?

Banks calculate savings account interest using the daily balance method, as mandated by RBI. Interest is calculated on your daily closing balance and credited to your account quarterly (typically in March, June, September, and December). The formula is: Daily Interest = Closing Balance × (Annual Rate / 365). The daily interest amounts are summed up for the quarter and credited to your account.

Q: Is savings account interest taxable?

Yes, savings account interest is taxable under 'Income from Other Sources'. However, Section 80TTA provides a deduction of up to ₹10,000 per year on savings account interest (available under old tax regime only). For senior citizens (60+), Section 80TTB provides a higher deduction of ₹50,000 on all deposit interest. No TDS is deducted on savings account interest, but you must report it in your ITR.

Q: What is a sweep-in fixed deposit?

A sweep-in FD (also called auto-sweep or flexi deposit) automatically transfers your savings account balance above a set threshold into a fixed deposit. The excess balance earns FD rates (~7%) instead of savings rates (~2.5-3.5%). When you need the money, the FD is auto-broken to fund the transaction. You earn FD rates on idle money with near-instant liquidity. Most major banks offer this feature.

Q: Are small finance bank savings accounts safe?

Yes, small finance banks like AU and Equitas are fully regulated by RBI and your deposits are insured by DICGC up to ₹5,00,000 per bank — the same insurance that covers SBI and HDFC deposits. They offer higher savings rates (6-7.25%) because they have lower operating costs and are still building their deposit base. For amounts up to ₹5L (DICGC limit), small finance banks are equally safe as any large bank.

Q: Should I move all my money to a high-rate savings account?

Not necessarily. A practical approach is to keep your salary account at a large bank for daily transactions and maintain only 1-2 months of expenses there. Move your emergency fund and idle surplus to a high-rate savings account (AU, Equitas, or Kotak) or set up a sweep FD at your existing bank. DICGC covers only ₹5L per bank, so for larger amounts, spreading across banks adds safety.

Calculate how much interest your savings account balance earns, compare rates across SBI, HDFC, ICICI, Kotak, AU Small Finance Bank, and Equitas. Check if your interest is within the Section 80TTA ₹10,000 tax-free limit. Find out how much more you could earn by switching banks or using sweep FDs and liquid funds for idle cash.

Calculate annual and monthly interest on your savings account balance

Average monthly balance

₹

Your typical savings account balance throughout the month

Bank

Select your bank to auto-fill the savings account interest rate

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How to Use This Calculator

Savings Interest tab

Enter your average monthly balance and select your bank. The calculator auto-fills the interest rate and shows your annual interest, monthly interest, and whether your interest falls within the Section 80TTA ₹10,000 limit (tax-free under old regime). Banks calculate interest on daily closing balance and credit it quarterly per RBI guidelines.

Bank Comparison tab

Enter your balance once. The calculator shows a side-by-side comparison of annual interest across SBI, HDFC Bank, ICICI Bank, Kotak Mahindra, AU Small Finance Bank, and Equitas Small Finance Bank. See exactly how much more you could earn by switching banks — small finance banks often offer 2-3x higher rates than large banks.

Optimize Idle Cash tab

Enter your idle balance (money sitting in savings beyond monthly needs) and current bank. The calculator compares four options: keeping it in savings, sweep FD (~7% p.a., auto-transfers to FD), liquid mutual fund (~6.5% p.a., T+1 redemption), and overnight fund (~6% p.a., lowest risk). See how much extra you could earn for minimal effort.

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The Formula

Banks calculate savings account interest using the daily balance method and credit it quarterly (per RBI guidelines). The simplified formula for estimation:

Annual Interest (simplified):
Interest = Average Monthly Balance × (Rate / 100)

Daily Balance Method (actual bank calculation):
Daily Interest = Closing Balance × (Rate / 100) / 365
Quarterly Credit = Sum of daily interest for the quarter

Where:
Rate = Annual savings account interest rate (e.g. 2.50% for SBI)
Balance = Your daily closing balance or average monthly balance

Section 80TTA Deduction:
Tax-free interest = min(Total savings interest, ₹10,000)
Taxable interest = Total interest − ₹10,000 (if interest > ₹10K)

Example: ₹2,00,000 in SBI at 2.50%
Annual interest = 2,00,000 × 2.50 / 100 = ₹5,000
Monthly interest = ₹5,000 / 12 = ₹417
80TTA status: ₹5,000 < ₹10,000 — entire interest is tax-free under old regime

Note: the actual interest may vary slightly from this estimate because banks use daily closing balances. If your balance fluctuates significantly during the month, the actual interest may be higher or lower than the estimate based on average balance.

Example

Priya — software engineer in Bangalore with ₹5L sitting idle in SBI savings

Priya (28) maintains about ₹5,00,000 in her SBI salary account. Her monthly expenses are around ₹60,000, so she only needs about ₹1L as a buffer. The remaining ₹4L is sitting idle, earning SBI's 2.50% rate. She wants to understand how much she is losing and what alternatives exist.

Step 1: Current earnings (SBI savings)

Balance₹5,00,000

Rate2.50% p.a. (SBI)

Annual interest₹12,500

Monthly interest₹1,042

Step 2: Bank comparison for ₹5L

SBI (2.50%)₹12,500/year

HDFC Bank (3.00%)₹15,000/year

Kotak Mahindra (4.00%)₹20,000/year

AU Small Finance Bank (7.25%)₹36,250/year

Step 3: Optimize the ₹4L idle portion

Keep in SBI savings₹10,000/year

Sweep FD (~7%)₹28,000/year

Liquid MF (~6.5%)₹26,000/year

Priya decides to keep ₹1L in SBI for daily expenses and set up a sweep FD for the remaining ₹4L. This earns her ₹28,000/year on the idle portion instead of ₹10,000 — an extra ₹18,000/year for zero effort. She also opens an AU Small Finance Bank account for her emergency fund to earn 7.25% on it.

FAQ

How do banks calculate savings account interest? ▼

Banks calculate savings account interest using the daily balance method, as mandated by RBI. Interest is calculated on your daily closing balance and credited to your account quarterly (typically in March, June, September, and December). The formula is: Daily Interest = Closing Balance × (Annual Rate / 365). The daily interest amounts are summed up for the quarter and credited to your account. This means your interest depends on how your balance fluctuates throughout the month, not just on the minimum or average balance.

Is savings account interest taxable? ▼

Yes, savings account interest is taxable under "Income from Other Sources". However, Section 80TTA provides a deduction of up to ₹10,000 per year on savings account interest (available under old tax regime only). If your total savings interest across all banks exceeds ₹10,000, only the amount above ₹10,000 is taxable. For senior citizens (60+), Section 80TTB provides a higher deduction of ₹50,000 on all deposit interest (savings + FD + RD combined). Unlike FD interest, no TDS is deducted on savings account interest — but you must still report it in your ITR.

What is a sweep-in fixed deposit? ▼

A sweep-in FD (also called auto-sweep or flexi deposit) automatically transfers your savings account balance above a set threshold into a fixed deposit. For example, if you set a threshold of ₹50,000 and your balance reaches ₹2,50,000, the excess ₹2,00,000 is automatically invested in an FD earning ~7% instead of 2.7-3.5% in savings. When you need the money (say you swipe your debit card for ₹1,50,000), the FD is auto-broken in reverse order to fund the transaction. You earn FD rates on idle money with near-instant liquidity. Most major banks (SBI, HDFC, ICICI, Axis) offer this feature — you just need to activate it.

Are small finance bank savings accounts safe? ▼

Yes, small finance banks like AU and Equitas are fully regulated by RBI and your deposits are insured by DICGC up to ₹5,00,000 per bank — the same insurance that covers SBI and HDFC deposits. They offer higher savings rates (6-7.25%) because they have lower operating costs and are still building their deposit base. The key differences from large banks: smaller branch/ATM networks (though UPI and digital banking work everywhere), potentially fewer product offerings, and customer service may vary. For amounts up to ₹5L (DICGC limit), small finance banks are equally safe as any large bank.

Should I move all my money to a high-rate savings account? ▼

Not necessarily. A practical approach is to keep your salary account at a large bank (for salary credits, EMI auto-debits, and wide ATM network) and maintain only 1-2 months of expenses there. Move your emergency fund and idle surplus to a high-rate savings account (AU, Equitas, or Kotak) or set up a sweep FD at your existing bank. This way, you get the convenience of a large bank for daily transactions and higher returns on idle money. Remember: DICGC covers only ₹5L per bank, so for larger amounts, spreading across banks also adds safety.

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