Bank Accounts6 min readPublished 7 Oct 2026
How Banks Calculate Savings Account Interest: Daily Balance Method & 80TTA Tax Exemption
Learn how Indian banks compute savings account interest on daily closing balances, quarterly payout cycles, and how Section 80TTA gives up to ₹10,000 tax-free interest.
Precious Thakur & Banking Research DeskSenior Financial Infrastructure Analyst
Fact-Checked & RBI Compliant
Key Takeaways & Summary
- Savings interest is calculated on end-of-day product balances: Daily Balance × Rate / 36500.
- Interest is credited quarterly to customer accounts on the last day of each quarter.
- Under Section 80TTA, up to ₹10,000 in savings interest is completely tax-free for individuals under 60 years.
In 2010, the Reserve Bank of India revolutionized savings accounts by mandating the Daily Balance Method, replacing the old system where interest was calculated only on the minimum balance between the 10th and the last day of the month.
#Savings Interest#Daily Balance Method#Section 80TTA#Income Tax#Banking Math
Frequently Asked Questions
How is interest calculated on a savings account?
Banks calculate interest daily based on your closing balance at midnight, sum it up over the quarter, and credit it directly to your account.