# Savings account interest rate calculation: how the savings account interest rate is calculated

Different banks offer different interest rates depending on the deposit amount.

and offer 3% interest on balances below Rs 50 lakh and 3.5% interest on balances above Rs 50 lakh.

**How many of us know how the real interest on a savings account is calculated?**

Here is a simple explanation of . However, note that you must check with your bank for the calculation of interest.

**How to calculate interest on a savings account**

RBI rules state that the interest rate on your savings account is determined daily based on your closing balance. Your bank will credit your account with interest earned on a semi-annual or quarterly basis, depending on the type of savings account you have and the bank’s policy. The Reserve Bank of India (RBI) has urged financial institutions to credit interest to savings accounts on a quarterly basis as it encourages users to save more money.

How to calculate savings interest rate is usually explained using the formula below. Banks also determine interest on savings accounts as follows:

If the daily amount is Rs 3 lakhs and the interest rate on the savings account is 4% per annum, the calculation will be:

Interest on a monthly basis = Daily balance * (Number of days) * Interest / (Days in the year)

3 lakhs * 30 * (4/100) / 365 = Rs 986 per month in interest

- Daily balance: 3 lakh
- Number of days: 30
- Interest: 4%
- Days in the year: 365

According to the HDFC Bank website, “Savings Bank interest will be calculated on the daily balances maintained in your account. Savings Bank interest will be paid quarterly.”

**How do I calculate taxes on savings account interest?**

The amount of income you receive from a savings account is called “income from other sources”. Tax returns for this interest must be filed. In the meantime, article 194 A of the computer law stipulates that the TDS is not attributable to a savings account.

According to the IDFC First Bank website, “Interest earned on this type of savings account that exceeds ?10,000 is only available for interest income up to ?10,000, and the Savings must be maintained with a recognized public or commercial bank or with the Post Office.