Savings Account: A big shock for those who have money in that private bank account

Savings Account | Any bank pays interest to those who have a savings account in the bank. This interest is paid to those who have money in their savings account. A private bank has reduced this interest rate drastically.

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IDFC First Bank has now reduced its savings account interest rates. It has announced new rates, especially for those with small and medium balances. The rate cut is effective from January 09. As per the new rates, IDFC First Bank has reduced interest rates on domestic, NRE and NRO savings accounts for various balance slabs.

There is a reduction of up to 200 basis points for small and medium deposits. That is, the interest rate has come down by up to two percent. The interest rate for large deposits has not changed much. For example, deposits between Rs. 10 crore and Rs. 25 crore will give 6% interest. Rs. 25 crore to Rs. 100 crore will give 5% interest, and above Rs. 100 crore will give 4% interest.

Earlier, the interest rate on balances between Rs.5 lakh and Rs.5 crore was 7%, and on balances between Rs.5 crore and Rs.10 crore it was 6.75%. Now, these rates have been reduced in the new structure. The highest interest rate is only 6.5%. That too, these rates are applicable to those with balances between Rs.10 lakh and Rs.10 crore. According to the new rates, there is no change in the interest rate of 3% on balances up to Rs.1 lakh. Deposits between Rs.1 lakh and Rs.10 lakh now pay 5% interest. This shows that the interest rate has come down for small depositors.

Savings account interest is calculated as follows. Monthly interest = Daily closing balance x days x interest / year days. For example, if the balance in a bank account is Rs. 5 lakhs and the annual interest is 5%, the monthly interest is Rs. 2,055. As per the new RBI rules, savings account interest is calculated on the basis of daily closing balance. But interest credit is usually paid quarterly or six months. IDFC First Bank does monthly interest credit.

TDS is not applicable on savings account interest. But it is taxed as ‘Income from other sources’. Individuals can claim deduction up to Rs.10,000 under Section 80TTA. Senior citizens can claim deduction up to Rs.50,000 under Section 80TTB. TDS is applicable on FD or RD interest if the annual interest exceeds Rs.40,000 (Rs.50,000 for senior citizens).

These changes are directly impacting small and medium depositors. Proper deposit planning is now more essential. This small reduction in bank rates gives every depositor the opportunity to make financial decisions.

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