How much does your Savings Bank Account earn for you? Well, the basic idea of keeping money in a bank account is to ensure liquidity in times of contingencies or to take care of your routine expenses. But if your savings account can fetch a higher interest rate on the idle money lying in your account, it will surely be an icing on the cake. Ask your bank about ‘Sweep-out’ and ‘Sweep-in’ facilities to earn slightly more on your savings bank account.
Every bank in our country offers this special savings account with automatic sweep-out facility where surplus funds are put in a fixed deposit. And in case you need the money or your bank account starts running low on funds, the fixed deposit will be automatically dissolved to meet the short fall.
This way your money never lies idle in your bank account. Creation of a linked fixed deposit ensures higher earnings through a higher rate of interest as against the regular savings bank interest rate.
The most convincing part of this facility is that you don’t have to track your idle funds regularly and give instructions to the bank to create term deposit out of your savings account. This process happens automatically.
You have to instruct the bank once at the time of availing this facility. You have to decide the threshold to define surplus funds in your account. In some cases, the banks have a fixed threshold of anywhere between 10,000 and upto 1 lakh.
Once your account balance hits the threshold, banks create FDs for the surplus amount. The tenure of the FD can be between one year to five years, depending on the bank. In case the FD matures, it is auto-renewed by the bank.
This facility can be clubbed with other bank accounts as well like- special accounts for women and kids etc.
Every bank has a different name for the savings account offering the sweep-out facility. Like, HDFC Bank calls it ‘HDFC Bank’s MoneyMaximize’, SBI calls it ‘Savings Plus Account’, Bank of Baroda has named it as ‘Edge Savings Account’.
Taxation
Interest earned on a bank fixed deposit is taxed as per the slab rate applicable to you. Thus, this facility might not benefit tax payers falling in the highest tax bracket.
Interest earned up to ₹10,000, in a savings account can be claimed as a deduction under Section 80TTA of Income Tax. Any interest earned over this is taxable as per the applicable slab rate.
