What is the Savings Account Interest?
Savings account interest is calculated daily on your closing balance and credited quarterly. Most Indian banks pay 2.7–4%, with some small finance banks offering more.
Against 6% inflation, a 3.5% savings account loses purchasing power every year. It is a place to hold liquidity, not to build wealth.
Formula & worked example
Real return = Interest rate − inflation rate
Worked example: ₹2,00,000 at 3.5% earns ₹7,000 a year — within the ₹10,000 Section 80TTA exemption, so no tax. But with 6% inflation, the real return is −2.5%, meaning that balance loses about ₹5,000 of purchasing power annually.
How to use this savings account interest calculator
- Enter your typical average balance, not the peak.
- Enter your bank's savings rate.
- Set inflation to see the real return.
- Section 80TTA exempts the first ₹10,000 of interest in the old regime.
Smart tips
- Keep only 1–2 months of expenses in savings. Move the rest to liquid funds or a sweep-in FD.
- Sweep-in accounts automatically convert surplus balance into FDs, earning 6–7% instead of 3.5%.
- Section 80TTA exempts ₹10,000 of savings interest; 80TTB gives seniors ₹50,000 on all interest.
- Small finance banks offer 6–7% on savings, and deposits up to ₹5 lakh are DICGC-insured.
- A large idle savings balance is one of the most common and expensive money mistakes.
Frequently asked questions
How is savings account interest calculated?
On the daily closing balance at the applicable rate, credited quarterly. The daily-balance method has applied since 2010.
Is savings account interest taxable?
Yes, but Section 80TTA exempts the first ₹10,000 a year in the old regime. Senior citizens get ₹50,000 under 80TTB.
How much should I keep in a savings account?
One to two months of expenses. Beyond that, liquid funds or sweep-in FDs earn substantially more with similar access.
What is a sweep-in account?
A facility that automatically moves balance above a threshold into a fixed deposit, and back when needed — giving FD rates with savings-account liquidity.
Want the theory behind the numbers? Read our savings guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 15 Oct 2026. Sources: DICGC — deposit insurance cover of ₹5 lakh per depositor per bank (information leaflet 2024-25), Income Tax Department — deduction limits for AY 2026-27: 80C ₹1,50,000, 80CCD(1B) ₹50,000, 80D ₹25,000/₹50,000, 80TTA ₹10,000, 80TTB ₹50,000, s.24(b) ₹2,00,000 (page updated 9 Jul 2026). How we check these numbers.