Who doesn’t want to save money? We all do. We all have certain goals in our life. Some goals are smaller e.g saving for your next trip, or buying your favourite gadget, while some people save for larger goals e.g buying a car, property or achieving financial freedom. No matter what your goal is, you need to take the first step. In this money-saving guide, we have covered the basics of saving money in India.
Understand that ‘Savings’ and ‘Investments’ are different concepts. While ‘Saving’ focuses on depositing small amounts in order to accumulate a large fund, ‘Investment’ focuses on growing your money with strategic financing. It is said that ‘Saving’ instils the idea of accumulating wealth in an individual, but it’s ‘Investment’ that helps you to achieve your goals efficiently.
In simple words, majorly there are two ways to start saving money in India:
- Open a savings account in a bank
- Open a savings account in a post office
Open a savings account in a bank
Almost every bank or financial institution in India offers Savings Account services. A Savings Account is used for the safe deposit of your money and it also allows easy withdrawal as and when required. You can deposit your money using methods such as cheques, cash deposit, fund transfer, internet banking, etc. Besides banks, you can also open a saving account at your nearest post office.
For withdrawal, you can use options such as cash withdrawal, 24*7 ATM transactions, net banking, or by using your debit card. Banks also offer a certain rate of interest on your money deposited in your savings account, which differs from bank to bank. While some of the banks require the accounts to maintain a minimum balance, other banks offer zero balance savings accounts.
What is a savings account?
A savings account is a type of bank or credit union account that lets a person deposit, secure, and withdraw money as needed. This type of account normally pays interest on deposits, but at a very modest rate as a small incentive for continuing to use the service. It is ideal for anyone who has a consistent or regular income, such as salaried employees. Most depositions take place with an individual depositing cash either through cheque submission, transfer of funds from one bank account to another, or cash deposit. Withdrawals can be made by cash withdrawal from an ATM, depositing a cheque, or online transactions through debit card or e-banking. Currently, all such transactions can also be recorded electronically and can be accessed online.
In this particular type of account, an individual is limited to a fixed amount of withdrawals of cash in a day. Having a savings account separates your daily spending money, which is maintained in your checking account, from cash that is set aside for a later period, such as an emergency or a trip. Some banks require their savings account customers to maintain a minimum amount in the account, while others provide a zero balance savings account option. Savings account interest rates differ from one bank to the next. Savings accounts, on the other hand, are designed to keep money secure and available whenever it is needed.
You may start a savings account by filling out an application, which can be done online or in-person at a bank. Your credentials and contact details will be required, as well as at least one piece of identification, such as a driver’s license or passport.
A decent savings account allows you to keep your money secure while still earning interest. You can assist ensure that you have cash set aside for your savings objectives by starting one with good rates and minimal fees and making regular payments.
Types of Savings Account
1. Regular/Basic Savings account: In most circumstances, this sort of account has a minimum average daily balance requirement, which must be met or a penalty would be imposed. For an annual charge, you may have checks and debit cards connected to this account to make access easier.
2. Salary Account: The majority of firms immediately deposit their employees’ monthly salaries and bonuses into this account. As a result, banks give businesses the opportunity to create savings accounts for their employees at favorable rates and terms. This account, on the other hand, comes with a few more perks, like a “zero balance” function, a free checkbook/draft every month or quarter, and a greater interest rate on deposit amounts. If the account holder’s pay is not credited for 2-3 months in a row, the account will be converted to a basic savings account.
3. Savings account for seniors: Only those over the age of 60 are eligible for this sort of account, and they may take advantage of several crucial perks not available with standard accounts. These advantages might include a higher interest rate, the elimination of minimum balance limitations, and special term deposit offers.
4. Joint Account: A joint account is a savings account that is handled by many account holders. This sort of account allows any of the account holders to withdraw the funds placed, and debit cards with each account holder’s name can be created independently. Joint accounts used to be limited to two people, generally a husband and wife, but the notion has since been expanded to include other family members. In the case of such accounts, certain banks allow up to four joint holders.
5. Women’s Savings Account: This sort of savings account is solely available to women, as the name implies. Special savings on other bank products, additional personal insurance coverage, greater account interest rates, and more are just a few of the primary features offered with this account.
6. Minor Account: Apart from the fact that they function as conventional savings accounts, these accounts have no minimum balance limitations. These accounts are intended to familiarise youngsters with banking services and to teach them how to use them. This is a sort of joint savings account in which one of the account holders is under the age of 18. One of the joint account holders must be the minor’s parent or guardian in this situation.
Savings Accounts Interest Rates in India
|Andhra Bank||3.00% – 3.00%|
|Axis Bank||3.50% – 4.00%|
|Bank of Baroda||2.75% – 3.20%|
|Canara Bank||2.90% – 3.20%|
|Citibank||2.50% – 2.50%|
|DBS Bank Savings Account||3.00% – 4.00%|
|HDFC Bank Savings Account||3.00% – 3.50%|
|ICICI Bank Savings Account||3.00% – 3.50%|
|IDBI Bank||3.00% – 3.40%|
|India Post Office||4.00% – 4.00%|
|Indian Bank||3.00% – 3.00%|
|Kotak Bank||3.50% – 4.00%|
|PNB||3.00% – 3.50%|
|SBI Savings Account||2.75% – 2.75%|
|South Indian Bank||2.35% – 4.50%|
|Standard Chartered Bank||0.50% – 3.25%|
|UCO Bank||2.50% – 2.50%|
|Yes Bank Savings Account||4.00% – 5.25%|
Benefits of using Savings Account
A savings account’s main goal or function is to help you save money, as the name implies. You may instill the habit of saving by setting aside some money rather than having it in cash. The account’s additional features differ based on the account type you select. Some key features include:
1. Convenient money management: You may send and receive payments, as well as move money between accounts. You may also use ATM services to get your money. The use of a personalized account number and checkbook increases security and assures the safety of your funds.
2. Liquidity: While the aim of a savings account would be to promote saving, it is also a smart location to put money away in case of an emergency. Unlike a Fixed Deposit, the funds are not locked up for a certain length of time and can be withdrawn anytime needed.
3. Minor interest rates: The interest rate offered by most banks is slightly greater than the rate of inflation. While this may appear to be a means to allow your money to increase over time, the underlying benefit is that the real worth of your money remains consistent. Interest rates range from 0.50 percent to 7.25 percent per year.
4. First step to savings: A savings account is the first step on your journey to saving and investing. This is frequently regarded as the entry-level unit necessary to begin on that path. It also helps to minimize overspending by setting money away rather than keeping it in cash.
5. The amount you can put in the account is unrestricted.
6. You may also link RD, EMI, and SIP deductions to your savings account to ensure that you make monthly payments on schedule.
Eligibility criteria for Savings Account
A savings account can be opened by anybody over the age of eighteen. Individuals who are generally qualified to open a standard savings account in India include:
1. Individuals above the age of 18 who are residents (sole or joint)
2. Hindu Undivided Family (HUF)
3. Foreign nationals living in the United States (with the requisite documentation)
4. Senior citizens’ savings account: You must be at least 60 years old.
5. Children’s savings account: You must be under the age of 18 and have a guardian/parent.
6. Women’s savings account: Women above the age of 18 are eligible to apply.
7. High-net-worth individuals’ savings accounts: Applicants must maintain a high average monthly balance at all times (AMB)
Aside from this, the only two items needed to create a savings account are identity and proof of address. This implies that in India, no evidence of income is necessary to create a savings account.
How to open a Savings account with a Bank?
How to open a Savings Account Offline?
Nowadays most Indian banks are offering zero balance savings accounts both online and in person. Some people choose to create a bank account online, while others prefer to go to their local bank office to start a savings account. Even if you don’t have access to the internet, you can still create a savings account by following these instructions:
- Pay a visit to your local bank.
- Fill out the account registration form.
- KYC papers must be submitted (ID and Address proof)
- Attach your passport images to the form.
- If necessary, submit a signed check.
- Your bank account will be activated in a few days after you submit the signed paperwork to the branch.
How to open an Online Savings account?
With the advent of technology and its incorporation into the financial system, you may now create a savings account online using these simple steps:
- To begin, conduct extensive research on various banks and the rates of interest they offer on savings accounts. According to your needs, locate the bank and the sort of account you intend to create.
- After you’ve selected the correct bank and account type for you, go to the bank’s website and look for the savings account application form. It’s worth noting that most banks now provide the option of creating a savings account over their website.
- The next step is to complete the application form and upload the needed papers to the website. Some banks demand a physical copy, for which they will send an executive to the address you provided on your application form, together with proof of address.
- You will be informed of the savings account activation once all of your documentation has been submitted and validated by the bank. It normally takes no more than two to three days.
Documents required to open a Savings Bank Account
To start a savings account, you’ll need the following papers.
- Proof of your identity
- Proof of address
- Passport-sized photos taken recently
For verification, most banks will want self-attested copies and originals. The following are examples of papers that are typically accepted as verification of identity or address:
- Voter ID card
- PAN (Personal Identification Number) card
- NREGA issues the Aadhar Card, which is a permanent driver’s license.
You’ll need the right documentation if you’re applying for a certain sort of savings account. If you’re looking for a bank account that demands a high minimum monthly average balance, you may need to provide extra proof of income.
Savings Account FAQ
1. How to open a savings account online?
It is fairly simple to start an online savings account. You may just go to the bank’s official website to create an account with them. Click on the ‘Apply immediately’ or ‘Apply Online’ option under the savings account section. You may be required to submit personal information and submit scanned copies of your PAN Card, ID, and proof of address. Within two days after submitting your application, you should get the checkbook and debit card at your doorstep. This, however, is contingent on the policies and services of the bank.
2. What method is used to distribute the interest generated on the deposit?
Interest is paid quarterly or monthly, depending on the savings account type and bank, and is calculated based on your average balance.
3. How can I update my savings account’s address?
You may modify or change your address either online or in-person at a convenient branch. You must complete the address change form and submit it to the authorities. It may take up to 7 business days for your account to reflect the change of address.
4. What is the maximum interest rate on a savings account that I can get?
Savings account interest rates typically start at 3.5 percent and can reach as high as 6%, based on the savings account type and the amount deposited.
5. Is it possible for me to move my savings account from one branch to another?
Yes, most banks allow you to transfer your savings account to a different branch. You can fill out a transfer form and request a change at your local branch.
How to check your balance in a Savings account?
As financial services have been more widely available, the variety of methods to access them has grown and become more convenient. Using your debit card at any local ATM is one way to check your savings account balance. Alternatively, you can use the internet banking tool to check your account balance.
How to check your account balance online?
Download the app of the bank where you created your account and log in with your credentials for another digitalized and easier approach to view your savings account amount. Many banks now provide a variety of financial services through mobile apps, including balance checks, virtual debit cards, cash transfers, Demat accounts, bill payments, mobile recharge, and loan applications. You can also check your balance using UPI services.
How to check your account balance on your phone?
You may check your bank balance over the phone by calling or sending an SMS. Account-holders can call the bank’s toll-free line to check their account balance without having to provide their account information to the officials. To inform you of your current account balance, the IVR system will need your debit card number and CVV number. Another option to verify the status is to send an SMS to the bank’s 6-digit phone number.
Minimum deposit and withdrawal
The minimum amount that may be withdrawn or deposited from any savings account is Rs. 5/-.
Cash withdrawal limit from Savings account
1. Each half-year, the number of withdrawals from savings accounts should be limited to 50. This will include debits resulting from third-party payment authorizations as well as those resulting from following standing instructions.
2. If the account is started in the middle of the year, the number of withdrawals permitted will be correspondingly increased.
3. When the number of withdrawals exceeds the limit, a service fee of at least Rs. 6/-, inclusive of Service Tax, will be charged for each transaction in excess of 50.
4. ATM debits, IRCTC transactions, POS debits, Internet, and Mobile transactions, on the other hand, shall not be counted for this reason.
5. When the bank receives a notification from the drawer to stop the payment of a cheque, the notification will be recorded, and the bank shall levy applicable Service costs as determined by the bank from time to time. The consumer can make a stop payment on the internet.
Open a savings account in a post office
One of the most accessible and popular savings accounts in the country is a Post Office Savings Account. The current interest rate for this account is 4 percent per annum. A post office savings account can also be opened for a minor with an age of ten or more. The minimum balance requirement is Rs. 500, while the maximum amount that may be deposited in a post office savings account is unlimited. It is also subject to tax exemption under the Income Tax Act 80TTA for the interest of up to Rs.10,000 generated in a single financial year.
Post Office Saving Schemes
India Post, which oversees the country’s postal system, also offers a variety of deposit options for investors, known as post office savings programmes. These plans were created to give investment opportunities and encourage Indians of all economic groups to save. These savings programmes are available at every post office in India, making it simple for anyone from all across the country to register and enrol.
Post Office Savings Schemes – Types
Currently, the government offers nine postal savings programmes to the general public for investment. They are listed below:
1. PPF – Public Provident Fund
Because of its numerous investor-friendly characteristics and accompanying benefits, the Public Provident Fund is a popular investment strategy among investors. It is one of the most popular investment options, with a 15-year lock-in term. Investors can, however, opt for a partial withdrawal after a tenure of five years. To keep the account operational, you must make a minimum annual deposit of Rs. 500.
2. Sukanya Samriddhi Account
Legal guardians or parents of any girl child under the age of ten can open an account in the kid’s name under this Indian post office saving initiative. A household may have a maximum of two accounts for each of its two daughters. The maturity amount is available to the kid after she reaches the age of 21. The maturity of the account varies depending on the age of the female child at the time of enrolment. As a result, the maturity duration will be increased from 21 years to up to 10 years with a limit of up to 10 years. For example, if the child was 6 years old when enrolled, the year of maturity will be 21 + 6 years, or 27 years.
3. NSC – National Savings Certificate
The National Savings Certificate, a Government of India programme, is a fixed-income investment programme that you may open at any post office. It’s a savings bond programme that encourages low- to middle-income individuals to invest while saving money on taxes under Section 80C. As a single individual, jointly, or as a guardian of a child, you can invest in NSC with a simple investment of Rs. 100. This scheme has a 5-year lock-in term. In addition, the yearly interest on NSCs is re-invested and paid out at maturity as a cumulative sum.
4. Post Office Monthly Income Scheme
Another dependable financial asset is the post office monthly savings program, which allows you to invest up to Rs. 4.5 lakh individually and Rs. 9 lakh jointly. It allows investors to obtain a consistent monthly income as an MIS plan.
5. Senior Citizen Savings Account
Senior citizens over the age of 60, or 55 in the event of voluntary retirement, can invest up to Rs. 15 lakh in this scheme to earn returns on investment regularly. A 5-year lock-in term is also included in the plan.
6. Post Office Savings Account
By depositing an investment of Rs.20, you can start a savings account with the post office. You must also keep a minimum balance of Rs.50 in the account. You may also transfer money from your post office savings account to your online account with India Post.
7. 5-year Office RD Account
You may open as many Recurring Deposit accounts with a post office as you wish with minimal monthly investments. These investing alternatives allow you to make regular instalments while also allowing you to build a considerable corpus during the investing period.
8. Post Office Time Deposit Account
Time deposits are a type of post office savings account that can be opened for a tenure of one, two, there or five years. Minors above the age of ten can invest in it with the help of a guardian. The savings option is comparable to what banks offer in the form of fixed deposits.
9. KVP – Kisan Vikas Patra
In 9 years and 10 months, you may earn twice the money you put in using KVP certificates. In addition, the deposit can only be encashed after 2.5 years if a small penalty is paid.
How to Open a Post Office Savings Account?
To start a post office savings account, take these simple steps.
1. To get an application form, go to your nearest post office or visit India Post’s official website.
2. Complete the form with the necessary information.
3. Please provide all necessary certifications as well as a passport-sized picture. Fill out the form with the essential information and send it together with your KYC evidence and any other documentation that your post office saving program requires.
4. Deposit a sum of money that must be less than Rs.20.
5. If you wish to open a post office savings account without a checkbook, you must make a minimum deposit of Rs.50.
A maximum of Rs one lakh can be deposited by a single account user, while a maximum of Rs two lakhs can be deposited by a joint account user. The lack of a lock-in or maturity time is one of the most appealing aspects of a Post Office savings account. Opening this type of account is extremely simple since one can walk into any post office, complete the necessary paperwork with the clerk, and start an account right away.
Eligibility to Open a Post Office Savings Account
Individuals who meet the following criteria are eligible to open a Post Office savings account.
1. A person of sound mind
2. Minors with a minimum age of ten years
3. A joint account can be opened by two or three persons.
4. A guardian on behalf of a minor
5. Accounts such as Institutional Accounts, Group Accounts, Official Capacity Accounts, and Security Deposit Accounts are not permitted.
Post Office Savings Account Interest Rate
The interest rate on Post Office savings accounts is set by the Central Government on a regular basis and ranges from 3% to 4%. Interest is computed monthly and credited once a year.
Post Office Savings Accounts pay a fixed rate of interest throughout the year, which is subject to alter as needed. The current interest rate is as follows:
|ROI (Rate Of Interest)||4%|
|List of Schemes||Interest Rate and Return||Taxability|
|Public Provident Fund (PPF)||7.9% p.a., annually||Section 80C exempts a maximum deposit of Rs. 1.5 lakh per year.|
|National Savings Certificate||7.9% p.a., annually||Section 80C allows for a tax deduction of up to Rs 1.5 lakh per year.|
|Sukanya Samriddhi Accounts||8.4% p.a., annually||Section 80C allows you to deduct up to Rs. 1.5 lakh in deposits. Interest earned and the maturity amount are both tax-free.|
|Post Office Monthly Income Scheme||7.7% p.a. , return payable monthly||Interest earned is taxed under the system.|
|Senior Citizen Savings Scheme||8.6% p.a., annually||Section 80C of the Income Tax Act provides a tax reimbursement of up to Rs. 1.5 lakh on deposits and TDS rebates of up to Rs. 50,000 on interest generated.|
|Post Office Savings Account||4% p.a.||Interest earned is free from tax up to Rs. 50,000.|
|Post Office Recurring Deposit Account||7.2% p.a., quarterly||On interest earned, there is no TDS.Individuals’ earnings are taxed according to their income tax bracket.|
|Kisan Vikas Patra||7.6%, annually||TDS is deducted on interest earned, but the corpus is tax-free when it matures.|
Post Office Account Withdrawals
The sum put in a Post Office savings account can be revoked at any time to meet the depositor’s needs. However, the withdrawal is conditional on maintaining a minimum balance of Rs. 50 in a basic account and Rs. 500 in accounts with a cheque option.
Post Office Savings Account Features
The following are the major characteristics of a Post Office savings account:
1. You have the option to terminate his or her account at any moment.
2. Accounts can be operated by minors over the age of ten.
3. At least one deposit or withdrawal must be made every three years to keep the account operational.
4. Only cash may be used to open the account.
5. The ability of nomination is provided both at the time of account opening and afterward.
6. Interest is tax-free up to a limit of Rs. 10,000 per year.
7. The amount of interest is eligible for income tax reduction under section 80L of the Internal Revenue Code.
8. It is possible to move the account from one post office to another.
Benefits of a Post Office Savings Account
Customers who open these accounts have access to check-writing and ATM services. The following are some of the appealing advantages of Post Office Savings Accounts:
1. Cheque facility: For existing accounts, a cheque facility is provided and may be requested.
2. ATM/Debit card: CBS Post Offices can provide ATM/Debit cards to account holders who have maintained the required minimum amount on the day the debit card is issued.
3. Minor Accounts: Minors can open a Post Office Savings Account. An account can be established in the name of a juvenile under the age of ten, but the parent or guardian will have the authority to administer the account on their behalf.
4. Portability: If you are dissatisfied with the services provided by the post office branch, or for any other reason, you can transfer your Post Office Savings Account to another location. In each post office, only one account may be opened.
5. Nomination: These accounts allow you to nominate someone at the time of account opening. At any time, the account holder can choose a person to receive the proceeds of the account following their death.
6. Joint Accounts: The joint account function allows two or three adults to have an account jointly. Unless there are no restrictions, a single account can be changed to a joint account and vice versa.
7. Exemptions from taxes: The joint account feature allows two or three people to have an account jointly. It is possible to convert a single account to a joint account and vice versa.
8. Customers can make electronic withdrawals and deposits at CBS Post offices using any electronic means.
9. Long-time of inactivity: To keep your account active, you just need to make one deposit or withdrawal per three financial years. Unless there have been no transactions for three financial years, the account would be considered dormant.
Post Office Saving Schemes – Who Can Invest?
These postal plans are suitable for investors who want a low-risk investment portfolio with a high return. Savings vehicles such as PPF, Sukanya Samriddhi Accounts, and National Savings Certificates, offer a competitive interest rate while posing no financial risks. Furthermore, because the minimum investment amount is minimal and accessible, individuals from many walks of life may benefit from these programmes.
1. In the case that the depositor dies, what happens to the money?
If the depositor dies, the money will be distributed to the nominee. If the account has no nomination at the time of the depositor’s death and the balance owed is less than Rs 60,000, the Department of Post Office may pay it to a person who appears before him and is authorized to it or to manage the deceased’s estate.
2. What is the maximum number of accounts that may be opened at a single post office?
At each post office, only one account and one joint account can be created.
3. What is the procedure for using the check method to fund a post office savings account?
Form SB/CQE-4 is used to request a new Cheque Book for a Savings Account, while Form SB/CQE-4A is used to request a new Cheque Book for a Checking Account.
4. What steps must I take to start a Post Office Savings Account?
It’s easy to open a Post Office Savings Account.
· Get a form from the post office or get one online.
· Send in the completed and signed form, as well as the relevant KYC papers and a photo.
· Pay a minimum of Rs.20 in addition to the amount you wish to deposit.
· Your account will be activated.
· Separate forms are provided for elder citizens.
5. Are there any tax advantages to the post office schemes?
Yes, tax exemptions and deductions are available for investments in post office programmes. Tax is taken from the deposit amount, generated interest, or both in a few programmes.
6. Is it possible to withdraw money from any post office branch?
Yes, you may withdraw money from any post office branch across the country, just like you can from a bank.
7. What documentation must be presented in order to start a Post Office Savings Account?
According to your risk category, you must comply with KYC requirements. To start a savings account at the post office, you must typically provide the following information:
· Electoral ID card with a photo
· Ration card with photo
· Your passport
· A driver’s licence
· Identity card from the Central/State Government or a PSU, issued by a recognised university/education board/college/school.
· Passbook/Statement from a bank or post office with your current address
· Ration Card with Current Address on Passport
· Bills for electricity and telephone service must be no more than three months old.
· Aadhaar card
· Salary slip from a reputable employer with current address
· One current passport-size photograph (two in the case of EDBO) is required. A picture of all joint account holders should be provided in the case of a joint account.
8. Is it possible to get a duplicate passbook?
Only the subpost offices can provide you with a duplicate passbook. To apply for a duplicate passbook, fill out the necessary form or send a manuscript application along with the specified fee, if applicable, in the form of a postal stamp.
9. Is it possible to convert an individual post office savings account to a joint savings account?
Yes, you can convert your separate post office savings account to a combined post office savings account. You may also transform your joint account to an individual account in the other direction.
10. Do savings accounts at the post office come with debit or ATM cards?
There are a few fundamental banking post offices that provide debit or ATM card choices to consumers.