All about savings

5 SIPs ( Systematic Investment Plans) you can invest in 2015

noreply@blogger.com (Snehal Joshi) — Thu, 27 Aug 2015 09:08:00 +0000

Most of us try to save some small amount from our monthly expenses so that it can act as buffer in the time of crisis. Wouldn’t it be great if this small buffer amount also provides returns? Some keep it in their cupboards, some may accumulate in a savings account or some may invest it. Recurring deposits, private kitties, stocks are some of the investment options used by most of us. However, the most rewarding option is the SIP (Systematic investment Plan) as it comparatively yields more returns than other investment options.

With the market plunging down, it is wise to invest in Mutual Funds than in individual stocks and also SIP will average the returns by utilizing the bears’ and bulls’ of market to its benefit.

Let us look at some of the best mutual fund schemes you can invest in.

The criteria considered for shortlisting these schemes are listed below.

The primary source of information is moneycontrol.com

UTI MNC Fund (G):

This fund was launched in May 1998. Since then it has consistently provided good returns over the years. This scheme is suitable for long term as well as short-term investors and for investors with low risk appetite.

Returns: This fund has been consistently exceeding the category average returns over the years. The fund has been giving around 14% returns every year.

The following table illustrates the amount of returns based on your start date of SIP.

Crisil Rank: It has been awarded with MF Rank #1 by CRISIL for quarter ended June 2015.

AUM: As on Jul 31, 2015, UTI MNC fund stand with Rs. 1,406 crore of asset under management. The fund has consistently maintained its asset under management over the period. Growing investor’s confidence and investment in the scheme has led to the growth in the asset under management.

Portfolio: The portfolio of the scheme involves major investment across diversified sectors as illustrated below.

It has major investment in companies like Maruti Suzuki, Bosch, HUL, United Spirits etc.

Risk Category: Moderately Low

Axis Long Term Equity Fund (G)

This fund was launched in December 2009. Axis Long-term equity fund is the same Axis Tax Saver Fund, which was renamed in September 2011.This fund comes under ELSS (Equity Linked Savings Scheme) and enables investors claim rebate under section 80 C of Income Tax Act.

Returns: This fund has provided around returns of 9% p.a to 35% p.a in the last three years.

The following table illustrates the returns you would have reaped based on your SIP start date.

Crisil Rank : It has been awarded with MF Rank #1 by CRISIL for quarter ended June 2015.

AUM: As on Jul 31, 2015, Axis Long Term Equity Fund stands at Rs. 5,879 crore of asset under management. Thus, the fund ensures investors’ confidence by providing benchmark-exceeding returns over the long term.

Portfolio: The portfolio of the scheme involves investment across diversified sectors as illustrated below.

The fund invests in top companies like HDFC Bank, TCS, Kotak Mahindra, Sun Pharma, Maruti Suzuki, Pidilite Industries etc.

Risk Category: Moderately High

Birla Sun Life Top 100 Fund (G)

This fund was started in September 2005. This fund is suitable for investors looking for medium to long-term capital growth. The capital is mainly invested in equity and related securities of top 100 companies with respect to their market capitalization.

Returns: This fund has provided equal or exceedingly good returns as compared to its competitors or the category average returns.

The following table illustrates the returns you would have reaped based on your SIP start date.

Crisil Rank: It has been awarded with MF Rank #1 by CRISIL for quarter ended June 2015

AUM: As on Jul 31, 2015, Birla Sun life Top 100 Fund claims Rs. 1,976 crore of asset under management. The fund has attracted more assets year over year which evidents increasing investors’ confidence in the fund and its returns.

Portfolio: The portfolio of the scheme involves investment predominantly in the large cap stocks as illustrated below.

The fund invests in large cap companies like HDFC Bank, ICICI Bank, Reliance, Axis Bank, Maruti Suzuki, Infosys,SBI etc.

Risk Category: Moderately High

Goldman Sachs Nifty Exchange Traded Scheme

This fund was launched in December 2001. This fund is apposite for investor’s aiming to yield gains that closely correspond to the Nifty index.

Returns: This fund has provided correspondingly good nifty Index related returns as compared to its peers and competitors in the fund category.

The following table illustrates the returns you would have reaped based on your SIP start date.

Crisil Rank: It has been awarded with MF Rank #1 by CRISIL for quarter ended June 2015.

AUM: As on Jul 31 2015, Goldman Sachs Nifty ETS vaunts Rs. 843 crore of assets under management. The assets under management have consistently grown since the fund inception.

Portfolio: The portfolio of the scheme involves investment in top companies comprising Nifty Index.

The fund invests in Companies comprising Nifty Index like HDFC Bank, Infosys,ITC, ICICI Bank, TCS, Axis Bank etc.

Risk Category: Moderately High

SBI Magnum Gilt - Long Term Plan (G)

This fund was introduced in Januray 2001. This fund is apposite for conservative investors willing to take moderate risk. The funds are invested in government securities issued by Central or State Government.

Returns: This fund has publicized more than average returns as compared to its peers and competitors in the fund category.

The following table illustrates the returns you would have reaped based on your SIP start date.

Crisil Rank: It has been awarded with MF Rank #1 by CRISIL for quarter ended June 2015.

AUM: As on Jul 31 2015, SBI Magnum Gilt- Long Term Plan brags Rs. 1,677 crore of assets under management. The assets under management have shown steady or an upward trend.

Portfolio: The portfolio of the scheme involves investment in long & short term debts

Risk Category: Moderate

Go-paperless- E-verify your returns - Use EVC (Electronic Verification Code)

noreply@blogger.com (Snehal Joshi) — Sun, 19 Jul 2015 20:09:00 +0000

Go-paperless- E-verify your returns - Use EVC (Electronic Verification Code)

On 13^th July 2015, Income Tax department propelled its e-filing verification system, which is centered on OTP (One-time –password). This system eliminates the requirement of sending ITR-V to CPC Bangalore.

Click here for Step by Step Guide for filing your Income Tax Returns

1) Who can use electronic verification system?

According to the rules notified by CBDT (Central Board of Direct taxes), the following are eligible to use e-verification system.

Ø Having total income < Rs 5 lakhs.

Ø No claim of tax refund

Ø Have registered their mobile number and email id, as OTP will be sent on the same.

If your total income is > Rs.5 lakhs or have to claim tax refund, then you will not be able to e-verify your returns through income Tax e-filing website. However, you can opt for e-verification by generating EVC/OTP through internet banking or by linking Aadhar Card.

1) What are the means to access e-verification system?

EVC required for e-verification, can be generated through following channels.

a) Income Tax e-filing website

Go to Income Tax website click here-------> Login ---------> e-File--------->Generate EVC

The OTP /EVC will be sent to your registered email id and mobile number.

Then click on e-Verify Return and enter the code.

b) Internet Banking

You can generate the OTP through internet banking, provided your PAN is linked to your account.

Login to your internet banking----------->Under e-tax tab, Click on Login to E-filing----> Confirm your PAN shown on the screen-------> You will be directed to Income Tax e-filing website--------> Then generate EVC and e-verify your returns as shown above.

c) Aadhar Card

The verification process

d) ATM

You can use ATM to generate EVC only if your PAN card is updated in your account. All you have to do is Use ATM card à From the screen, select the option, Generate EVC for Income Tax return filing àEVC will be sent on your registered mobile numberà E-verify your returns as shown in channel a) above

What if you have already filed your returns?

If you have already filed your returns and have posted (or not posted) your ITR V, then also you can e-verify your returns by generating OTP/EVC with the help of above means

To conclude, e-Verification saves you from a lot of hassle of having to print and post your e-filed returns. Hence, if you are eligible for e-Verification, you must definitely use this feature as it completely digitizes the entire returns filing process.

Any queries related to filing of income tax returns can be posted in the comments below.

File your Income Tax Returns online in 8 easy steps (For Resident individuals)

noreply@blogger.com (Snehal Joshi) — Sun, 12 Jul 2015 00:09:00 +0000

Step by step guide to file IT returns online
(For Resident Individuals)

In 10 years of my banking career, for the first two years (like most salaried professionals) I had outsourced the filing of my tax returns. However, I did not receive timely acknowledgements from the CA and had to go through a lot of hassle to confirm that the returns were indeed filed correctly. It was then that I decided to file tax returns on my own. And to my surprise, I found it really simple and easy. I have been successfully doing e-filing and receive timely acknowledgements for all these years.

Let me spell out a step-by-step guide that will help you to e-file your returns this financial year

Who should file income tax returns?

· If your gross total income( i.e income from all sources) without any allowed deduction exceeds Rs.2,50,000

Ø For senior citizens in the age group of 60-80 years the gross total income limit is Rs.3,00,000

Ø For senior citizens more than 80 years, the gross total income limit is Rs.5,00,000

· If you want to claim refund of TDS ( Tax deducted at source)

· If you want to carry forward any loss under applicable head of income.

· If you have an asset, property or account outside India.

If you fall in any of the above categories, then it is mandatory for you to file your income tax returns.

Pre requisites of filing an income tax return

1. Last year’s tax return copy

2. Bank statement of your account/accounts for the financial year

3. TDS certificates

4. Copies of your receipts of investment which are allowed for deductions under the Income tax act

5. Interest statement for the financial year

6. Form 16 (provided by the employer for salaried individuals)

7. Form 26 AS (Tax Credit statement from income tax department for cross checking)

Step 1:- Login

First register yourself on income-tax website-https://incometaxindiaefiling.gov.in/( click here to register)

Fill in all the mandatory fields correctly, most importantly, provide your correct email address and mobile number, as link for authorization and PIN are sent on this.

1) Once a login id is created, log into your account using your PAN number, password & date of birth.

2) You can directly log into the income tax e filing site through your net banking provided you are registered user of e-filing income tax portal and your pan number is registered with the bank.

Ø You can do this by clicking on the NetBanking icon as below which will re-direct you to list of banks. Select your bank and then log into your net banking account

Ø Or you can directly log into your net banking account through your bank’s website.

Next step is to click on the E filing (Income tax) tab. This will automatically log you into your income tax account.

Step 2:- Downloading ITR

You can now download ITR 1 (for salaried individuals & individuals having interest income or income from one house property) from the Download section or from the home page of the website https://incometaxindiaefiling.gov.in/

The Java Utility version of the ITR 1 is automated, simple and can be uploaded swiftly. You should have java version 7 or above for the utility. If you don’t have it, it can also be download from the income tax website.

We will discuss the Java Utility version step-wise in the below section.

Step 3:- Filling up the personal and address details

Extract the java utility version. Click on the icon and open the utility. The easiest way is to opt for the pre-fill option in the utility as it will save you from entering personal and address details and the information as per your choice

Ø Pan (address corresponding your PAN with IT department alongwith tax details)

Ø Previous ITR (address from last year’s filed ITR and tax details) or

Ø None (only name and columns upto A6 will be filled alongwith tax details ) will be automatically updated in the utility

Use your income tax webite’s login and password and birthdate and select your option

Step 4:- Completing your filing status

A19 Select employer category as applicable to you

A20 Select the tax status as applicable to you

· Tax refundable (if filing for refund)

· Tax payable (if there is still tax to be paid)

· Nil tax balance (if there is no refund or pending taxes)

A21 Select residential status as RES-Resident from the dropdown

A22 Return is normally filed under section 11-on or before due date 139(1)

A23 Click on ‘Yes’, if you are governed by Portuguese Civil Code and impacted bv Section 5A of Income-tax Act, 1961 otherwise click ‘No’

A24 Applicable if A23 is ‘Yes’

A25 Details of original return for the same assessment year have to be entered

A26 Enter the notice details if applicable

A27 Click on ‘Yes’, if you have Aadhar number or else click, ‘No’

A28 Fill in your Aadhar number if A27 is ‘Yes’

Step 5:- Gross Total Income and Deductions

B1 Enter these details from your Form 16 provided by your employer.

B2 If you own a house property in your name, then select the applicable option from Self-occupied and Let out.

Enter the income from your house property in the field below, enter amount with negative sign if it is a loss.

B3 Enter the income earned from other sources than salary like interest income, dividend income, rental income etc excluding Lottery prize and Income from Horse Races.

B4 Automatically calculated field

C1-C18 Enter these fields from your Form 16 or your savings certificates across the corresponding applicable sections. For C11, the details as per your donation receipt have also to be entered in the 80G tab above.

C19 This field is automatically calculated

C20 This field is automatically calculated and is your Net Taxable Income after allowed deductions.

D1- D6 These fields are automatically calculated.

D7 If salary for more than this financial year is received in arrears or in advance due to which you fall in the upper income tax slab then upon application, assessing officer can grant prescribed relief. This amount has to be entered in field D7.

D8 This field is automatically calculated.

D9 This is the amount of interest that has to be paid ,if return is filed after due date as specified under section 139(1)

D10 This is the interest amount to be paid by an assessee, if he fails to pay the required advance tax for a financial year if applicable

D11 This is the interest related to Penalty on the Advance Tax which is calculated on the basis of difference between actual amount paid and due.

D12 This field is automatically calculated.

Step 6: Fill your TDS details

SCH TDS 1: Fill in the fields as per the corresponding details mentioned in your Form 16.

SCH TDS 2: Fill in the details as per the TDS certificate provided by the deductor.

SCH TDS 3: Fill in the details of tax payments made by you in case the tax payable is more than the taxes paid.

Note:- Verify whether the TDS details as mentioned in Form 16 or Form 16A matches with those in Form 26AS.

Step 7:- Verifying your Taxes Paid

D13 - D18 These fields are automatically calculated

D19 Enter details of all exempt income e.g. Dividend income, Agricultural income etc

D20 Enter the number of savings account(s) and current account(s) you have or had in the financial year.

Enter these account details in the rows below.

Fill in your details in the verification section, You will not have to fill the TRP field as you yourself are submitting your returns.

Step 8 : Validating, Saving and uploading.

Validate your return for any errors. Resolve your errors and save the file. The file will be save as xml.

To upload your returns, go to https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html.Log into your account and upload your file from the e-File tab .After successful submission ITR-V (ITR verification) will be generated, which can be downloaded from My Account tab. Take a print out of ITR-V , sign it and send it along with copies of Form 16 & Savings certificate & TDS certificates via ordinary post or speed post to the address below within 120 days of filing your returns online (individuals with Aadhar number need not send ITR V to CPC bangalore)

“Income-Tax Department-CPC” , Post Bag No-1 , Electronic City Post Office, Bangalore - 560 100, Karnataka.

Important:-

CBDT vide Notification No. 49/2015 Dtd 22.06.2015 notified changes in Rule 12 of Income Tax Act 1962 for Form ITR-1, ITR-2 and ITR-4S for Assessment Year 2015-16 (Financial Year 2014-15). The changes included Introduction of AadharCard Number in ITR. (But Those Who Give Aadhar Card Details also have to Send ITR V because at present OTP system is not implemented).And so the paperless filing had not practically started.

But OTP/EVC system has practically started on 13th July. As rightly brought up by one of the readers, Ravi, from this year onwards, we need not send a copy of ITR-V to CPC Bangalore.

This facility is available only to the following:-

Having total income < Rs 5 lakh
Not claiming tax refund
Registered their mobile number and email id as OTP will be sent on the same.

To know more about to e-verify your income tax returns through following channels, click here

•Income Tax e-filing website

•Internet banking

•Aadhar Number

•ATM

Any queries related to filing of income tax returns can be posted in the comments below.

Use "Rule of 72" to double your investments

noreply@blogger.com (Snehal Joshi) — Sat, 04 Jul 2015 07:35:00 +0000

Numbers aids in our day-to-day transactions and decisions. Nevertheless, 72 is a number that

simplicities our financial investment decisions.

How does the magic of 72 work?

Albert Einstein once said that, “Compounding is the eighth wonder of the world”, and the Rule of 72 is the simple way to test the power of compounding on your investments.

The “Rule of 72” is a simplified way to find out how long your investments will take to double up, the only condition is to provide with a fixed annual rate of return. You have to divide 72 by the annual interest rate of your investments and the result is rough estimate of years your money will take to double up.

Formula:

How to use it?

If you have invested amount of Rs.1 lakh in funds that gives you an approximate return of 9%, then let’s see how many years will it take to get Rs.2 lakhs (risk-free returns)

Hence, your 1 lakh Rs. will become 2 lakhs after approximate 8 years with a rate of return of 9%.

You can, not only use this rule to find the period for doubling up of your investments, but also to find the number of years it will take you to achieve your financial target amount.

Let us understand this with the help of the following example.

Disha has 5,00,000 Rs invested across different types of investment instruments which is estimated to give average yearly return of 8 %.Now, She wants to know, when will her investment returns sum up to 20,00,000 Rs, so that she can achieve a milestone of her financial goals.

Let us use the magic of 72 to find it for Disha.

Disha’s 5 lakhs will become 10 lakhs in 9 years.

And this way 10 lakhs will double up to 20 lakhs in the next 9 years with rate of return being constant.

Hence Disha will have 20,00,000 in her hand from her investments after 9+9, i.e 18 years.

Can 72 help me in any other way?

“The Rule of 72” also assists you to estimate the rate of return required on your investments, which eventually helps you in achieving your financial objective after given number of years.

Gunjan has Rs. 8,00,000 today and requires Rs. 16,00,000 after 6 years to buy a proposed small property.

Using the “Rule of 72”

So, Gunjan will have to invest Rs. 8,00,000 in an instrument or across a group of savings instruments that will give an approximate average return of 12 % per annum to reap Rs.16,00,00 after 6 years.

Does Rule of 72 apply only for investments? Can it be used for other calculations?

The answer to this is “Yes”. “Rule of 72” also helps to find the value of our current capital or our future investment returns in future given the rate of inflation.

If you have 30 lakhs today or are going to receive 30 lakhs from your investments after 10 years, then what will be the value (or purchasing power) of your amount after 10 years, given an average inflation rate of 6%? By using “Rule of 72” in reverse, we can understand the power of inflation.

Therefore, your amount will have half of its existing value, after 12 years. So, if you are going to receive 30 lakhs after 12 years then it will have the purchasing power which is equal to that of Rs.15 lakhs today.

Thus, “Rule of 72” is an effective tool to aid your investment decision-making process, which leads you to achieve your financial goals, as well as to estimate the future value of your capital or investments.

Note:

“Rule of 72” is just a rapid estimate and is not necessarily entirely accurate.

The actual time required to double your investment may vary based on various factors like change in rate of return over time, type of investment instrument, way of interest application and possible tax implications.

Even so, “Rule of 72” is a quick and helpful way to carry out your investment related decisions.

Comment below, if this post was helpful.

How to grow your money tree?

noreply@blogger.com (Snehal Joshi) — Mon, 29 Jun 2015 06:46:00 +0000

How to grow your money tree?

Four friends Hardik, Divya, Nehal & Prateek had met after a long time in a cafeteria. Hardik was an IT professional, Divya had recently started working in a bank, Nehal had chosen to be homemaker while Prateek had a small business of computer parts.

Hardik: Do you all know, I am the highest taxpayer in my office. My colleagues block their money for tax saving and then borrow money when they require it .I prefer to pay tax instead and then use my money when required so that I do not have to borrow money in any case.

Divya : That means you don’t save money. I am already looking for saving and investment options and will start investing since my first salary.

Hardik: I do save in Provident Fund (PF) that is deducted from my salary.

Divya: But isn’t that a long term investment?

Hardik: Dunno

Nehal: I do not have to pay tax, so no hassle of investments and all. I save money in my savings account only and use as and when required.

Prateek: I am a businessperson and do not believe in any saving and investment other than my business.

From the above conversation, we understand that many are not sentient about savings and are naive about the investment options available to them.

Tip 1 # Saving and investing early is the first step in planting your money tree

Let us explore some of the investment options, which are easily available to all of us for making small investments. The yields of the same persuade us to save and invest.

Fixed Deposit

Fixed deposit (FD) allows you to deposit your savings with a bank or financial institution for a fixed percentage of interest and for a fixed period. The interest rate on the deposit vary depending on the amount, period and between bank offers. At the time of the maturity, the principal amount along with interest is credited to customer’s account.

Generally, fixed deposits have three types of interest options. The same are expounded as below.

Interest option	Cumulative	Quarterly	Monthly
Feature	Interest is credited to deposit account on quarterly basis and therefore interest upon interest is calculated and paid at the time of the maturity along with the principle amount	Simple interest is paid to the investor on quarterly basis	Discounted interest is paid to the interest on monthly basis
Benefits	It gives highest return on your deposit	It gives the option of income every quarter, however the interest amount is marginally lesser than the cumulative interest	It gives the option of monthly income; however, the interest amount is marginally lesser than cumulative interest or quarterly interest. Although same interest rates as other fixed deposits are applicable, the monthly interest paid is at a discounted rate.
Tax deducted at source(TDS)	TDS @ 10 % (where pan is registered with the bank) & 20 % (where pan is not registered with the bank )is automatically deducted as and when your estimated interest income exceeds Rs.10,000 p.a If your income for a year less than Rs. 2 lakhs and interest income exceeds 10,000 mark , then it is advisable to submit Form 15G(for individuals) or 15H (for senior citizens) at the beginning of every financial year, i.e in April every year

Tip # 2 Compounding is the eight wonder of the world- Albert Einstein

Recurring Deposit (RD)

This option is an advantage for individuals who cannot save a lump sum amount for availing fixed deposit scheme; instead, they can save small amounts every month. In this scheme, you can deposit a fixed amount every month for a fixed period at pre-determined interest rate, which is generally same as fixed deposit interest rate. Some banks also provide the option of depositing variable amount every month as per your savings and interest is calculated on the amount deposited by you. Principal amount along with interest is paid to the customer on maturity.

There was no TDS deducted on interest in RD accounts until May 2015,w.e.f June 2015 TDS is applicable on accrued interest or interest paid on RD accounts.

Tip #3 Small savings can help you to build stashes for a rainy day

Mutual Funds

Mutual fund is made up of the money pooled in by a large number of investors. An expert Fund manager then invests this money across various financial instruments.

It gives you the option of investing a lumpsum amount at a time or you can opt for SIP (Systematic Investment Plan). SIP is similar to a recurring deposit, wherein a fixed amount is invested in your selected fund based upon your risk appetite for a fixed duration. However, returns vary from company to company and from funds to funds.

You can choose to invest in a fund based on your risk appetite and fund features. Different types of funds like equity, debt, balanced, gilt, money market, sector specific, index funds are available in the market.

To know more about best SIPs for 2015,click here

Tip #4 Diversify your investment to mitigate risk- (“Don’t put all your eggs in one basket")

Post Office Savings Scheme

Post office savings schemes are not that popular across small investors’ class whereas factually post office savings scheme are really beneficial for small retail investors.

Some of the post office savings schemes are elaborated below.

Savings account: This savings account provides interest rate of 4% p.a and bears all the normal features of any savings account. Also account can be transferred from one post office to other. To know more about benefits of a Savings account, click here

Recurring deposit/ Fixed deposit//Senior Citizen Savings scheme: FD & RD has the same features of any other recurring deposit or fixed deposit, but the maximum duration is of 5 years only. Senior citizen scheme is characterized by higher interest rate with benefit of tax exempton under section 80C of IT Act.

Sukanya Samridhi Account: This scheme is available for girls upto the age of 10 years only. Rate of interest applicable to this account is 9.2% p.a which is calculated and compounded on yearly basis. You can deposit a minimum Rs.1000 and maximum of Rs. 1,50,000 in the account in a financial year.

PPF (Public Provident Fund) account: PF account has locked in period of 15 years and is allowed for tax exemption under 80C of IT Act. The current interest at 8.7% is tax free!

NSC (National Savings Certificate): NSC comes with two maturities:

o 5 years with interest @ 8.5% compounded six monthly

o 10 yrs with interest @ 8.8% compounded six monthly, both payable at maturity.

NSC is eligible for tax rebate in IT Act under sec.80 C

KVP (Kisan Vikas Patra): Amount invested in KVP doubles in 100 months (approx. interest of 8.4%) and can be en-cashed after 30 months from date of issue.

Tip # 5 A meticulous approach with diversification, buy-and-hold and rupee-cost-averaging strategies makes investment recompensing even in the worst of times.

To know more about Post Office savings scheme click here

Share your savings and investment tips in the comments below

6 ways to make your savings account work for you

noreply@blogger.com (Snehal Joshi) — Sat, 20 Jun 2015 06:19:00 +0000

6 ways to make your savings account work for you

Probably every one of us has a savings account in a bank. But still many of us are oblivious about how to utilize the benefits of savings account.

Let us understand, in what ways, can we make our savings account work for us!

1. Earning Interest

In 2011, RBI deregulated the interest rates and allowed the banks to set their own rates on savings account.

Since then, bank pays interest on basis of your daily end of day account balance.

Generally, interest is credited on half-yearly basis to savings account. However, some banks have their own schedule viz: - monthly or quarterly.

For eg: Mr A. has 50,000 in his account for 15 days, 10,000 for 10 days and 8,000 for 5 days in his savings account in XYZ bank that offers 4% interest on savings account.

Calculation of monthly interest rate

Daily interest rate = 4/365/100 = 0.010959/100 = 0.00011

Monthly interest = 0.00011 [(50000*15) + (10000*10) + (8000*5)]

= 97.53425 Rs

Some of the banks claim to be offering a higher interest rate (6-7%). However, this is mostly applicable on balance above Rs.1 lakh and a lesser interest rate will be applied on balance below this amount.

For e.g a bank, ABC offers 7% p.a on your savings account that has 1.5 lakh daily balance. Then a lower interest say 4% is applicable on your balance of Rs. 1 lakh and 7% is applicable on only Rs. 50000 of your total amount.

2. Sweep transfer facility

Some banks offer a facility where amount above a stipulated balance in your savings account is automatically transferred to linked fixed deposit (FD) account. Here, you enjoy the benefit of higher FD rate on such amount transferred. This facility provides higher returns with liquidity. In case there is shortfall for a transaction in savings account, the same is fulfilled by the required amount from the linked FD. Swept FDs are generally broken on LIFO (Last in first out) basis to prevent premature interest loss.

This facility is useful for individuals who can keep a track of and remembers maintaining average balance in the savings account as excess amount above stipulated balance will keep on sweeping into FD accounts and the account may be penalized with non-maintenance charges.

3. NEFT/RTGS/IMPS

You can benefit from your savings account by activating the instant and quick fund transfer facilities.

NEFT is National Electronic Fund Transfer wherein individuals can electronically transfer funds from one bank to any other bank in the country. Transactions of upto Rs. 2 lacs can be done via NEFT with minimal charges.

RTGS is Real Time Gross Settlement wherein funds are transferred on real time and order-by-order basis. Large value transactions above Rs. 2lacs can be done via RTGS

IMPS is immediate payment service available 24*7 and throughout the year irrespective of weekends or holidays. IMPS is immediate fund transfer facility that can be availed using Mobile, PC, Laptop or tablet.

4. Security benefits

Pradhan Mantri Suraksha Bima Yojana – You can avail the security of accidental death benefit of upto Rs. 2 lacs under this scheme. All you have to do is fill the prescribed forms and provide auto-debit instruction of premium of Rs. 12/- p.a from your savings account.

Pradhan Mantri Jeevan Jyoti Bima Yojana - This scheme provides the security of life insurance of Rs. 2 lacs , which is payable to the nominee on demise of the insured. This facility is available at an annual premium of Rs. 330/- to be auto debited from your savings account.

These schemes are to the individuals as long as they hold savings accounts in the bank.

5. Cashing LPG subsidy

LPG subsidy is one of the subsidies provided by the government through DBTL (PAHAL) scheme, in which the LPG subsidy amount is directly credited to your savings account. To avail this subsidy, all you have to do is link your AADHAR number to your savings account by filling prescribed form or through net banking. Next step is to link your AADHAR card to your LPG consumer number.

6. More Savings through tax exemption

Interest amount of upto Rs. 10,000/- from savings account is exempted from tax under section 80
TTA of Income Tax Act. So, if your FD interest is crossing the tax exemption mark, then it would be wise to park amount in your savings account. This way you can earn the benefit of elevated interest rates of savings account while saving on tax.

Click here to Know how you can e-verify your income tax returns with the help of your savings account and ATM card.