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How Does Interest Work on a Savings Account?

Disclaimer: This article is for general information/education and is not investment advice. The information is shared in good faith and for general informational purposes only. Ujjivan SFB does not make any representations or warranties regarding the accuracy, completeness, or reliability of the content.

May 02, 2026

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A savings account helps you keep your money safe while you earn interest on the account balance. Such accounts give you easy access to your funds, so you can withdraw or transfer money whenever you need via RTGS, IMPS or NEFT, based on your requirement and transaction volume. But how does savings account interest work and how is it paid out to you? We’ve decoded these questions and more in this blog. Let’s dive in!

What is Savings Account Interest?

Savings account interest is the interest the bank pays you for keeping money in your account. The interest depends on the balance you have maintained in your account. For latest Ujjivan SFB Savings Account interest rates, please click here.

How Savings Account Interest is Calculated?

Daily Interest = (Daily Balance × Interest Rate) ÷ 365

As per the guidelines set by the Reserve Bank of India (RBI), Ujjivan SFB calculates savings account interest daily based on your account’s closing balance. You can use our Savings Account Calculator to instantly estimate the interest you may earn on your balance.

When is Savings Account Interest Credited?

At Ujjivan SFB, interest is calculated on your daily closing balance and credited to your account at the end of each quarter. Rates may vary based on account balance.

Key Features & Benefits of Ujjivan SFB Savings Account

Higher interest rates
Earn reward points when you open an account and make transactions
Get RuPay-powered feature-packed Debit Card that comes with multiple offers and discounts
Stay updated on your a/c with SMS alerts on your registered mobile number
Transfer funds easily via NEFT, RTGS and IMPS
Multiple products, including Digital Savings Account that allows you to open an account without visiting a branch

Each account comes with their own set of benefits. You can check all our Savings Account products here.

How is Savings Account Interest Structured and Applied?

1. Slab-Based Interest Rates

Ujjivan SFB offers slab-based interest rates, meaning the interest rate varies based on your account balance. You can check the latest rates here.

How to Improve Your Savings Account Interest Earnings

Want to maximise your bank account earnings? Here’s what you can do:

1. Invest in Fixed Deposit (FD)

Ujjivan SFB offers high-interest FDs that can help you supercharge your savings. FDs are not market-linked, so the rates don’t depend on market performance. Also, the rate offered at the time you book an FD remains fixed throughout the tenure irrespective of the bank reducing FD rates later, thereby letting you earn stable and assured returns.

2. Maintain a Consistent Balance

Interest is calculated on your daily balance. Keeping a stable or higher balance may help improve overall earnings.

Please Note: Account may require you to maintain a Monthly Average Balance (MAB). For example, Ujjivan SFB’s Digital Savings Account comes with an MAB of ₹1,000.

Tax on Savings Account Interest and Available Deductions

Interest earned on a savings account is added to your total income and taxed as per your applicable income tax slab.

Individuals can claim a tax deduction of up to ₹10,000 on savings account interest under Section 80TTA (now under Clause 153)
Senior citizens can claim a higher tax deduction of up to ₹50,000 under section 80TTB, which includes interest from savings accounts and deposits (FDs, RDs)

Note: From April 1, 2026, updated provisions under Income Tax Act, 2025 apply. Deductions on interest from savings and deposits are covered under Clause 153, which replaces earlier sections such as 80TTA and 80TTB.

Important Points to Know

Senior citizens receive the same savings account interest rates, with no additional rate applied
The same savings account interest rates apply to both NRO and NRE accounts
The bank applies higher interest rates only to incremental balances within each slab

Final Thoughts

Savings account interest depends on how your balance is maintained and how the bank applies the rate. It offers a simple way to keep your money accessible while earning a steady return over time. Understanding how savings account interest rates work can help you use your account more effectively and make better decisions about managing your savings.

Disclaimer:

The contents herein are only for informational purposes and generic in nature. The content does not amount to an offer, invitation or solicitation of any kind to buy or sell, and are not intended to create any legal rights or obligations. This information is subject to updation, completion, amendment and verification without notice. The contents herein are also subject to other product-specific terms and conditions, as well as any applicable third-party terms and conditions, for which Ujjivan Small Finance Bank assumes no responsibility or liability.

Nothing contained herein is intended to constitute financial, investment, legal, tax, or any other professional advice or opinion. Please obtain professional advice before making investment or any other decisions. Any investment decisions that may be made by the you shall be at your own sole discretion, independent analysis and evaluation of the risks involved. The use of any information set out in this document is entirely at the user’s own risk. Ujjivan Small Finance Bank Limited makes no representation or warranty, express or implied, as to the accuracy and completeness for any information herein. The Bank disclaims any and all liability for any loss or damage (direct, indirect, consequential, or otherwise) incurred by you due to use of or due to investment, product application decisions made by you on the basis of the contents herein. While the information is prepared in good faith from sources deemed reliable (including public sources), the Bank disclaims any liability with respect to accuracy of information or any error or omission or any loss or damage incurred by anyone in reliance on the contents herein, in any manner whatsoever.

To know more about Ujjivan Small Finance Bank Products Visit:"https://www.ujjivansfb.bank.in"

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FAQs

1. Is savings account interest credited automatically?

Yes. Interest is calculated daily on your closing balance and credited quarterly.

2. Can two accounts with the same interest rate earn different amounts?

Yes. The interest earned depends on your account balance.

3. Do digital savings accounts calculate interest differently?

No. The calculation method remains the same.