How interest is calculated
Since April 2010 banks must use the daily product method: each day's closing balance earns one day of interest at the published rate, accrued and credited to your account at the end of each calendar quarter (June, Sept, Dec, Mar).
Formula: Interest = Avg daily balance × rate × days ÷ 365
Tax on savings interest
- Banks do not deduct TDS on savings interest (only on FD/RD).
- Section 80TTA — regular taxpayers: first ₹10,000 of savings interest deductible.
- Section 80TTB — seniors (≥60): first ₹50,000 of interest from any deposit (savings + FD/RD) deductible.
- Excess interest is added to income and taxed at your slab.