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Understanding passive income from savings accounts

27 May 2025 by Team FinFIRST

Savings Account for Passive Income

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Today, becoming wealthy is not merely a matter of earning an active income. Passive income—money earned with minimal effort—can be a financial game-changer. Surprisingly, one of the easiest ways of creating passive income is through your savings account. If managed wisely, it can provide steady returns without compromising on liquidity. Let's see how.

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5 best ways to save money for future

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Understanding passive income from savings accounts

Passive income from a savings account can yield in the form of interest accrued on your deposited money. While traditional accounts may provide limited returns, high-yield savings accounts can significantly enhance your returns. Such accounts are suitable for individuals who want to grow their money while retaining access to funds when needed.

Types of savings accounts that maximise passive income

All savings accounts may not offer the same benefits. Here are a couple of more rewarding savings account types:

High-interest savings accounts:

They provide interest rates much higher than regular savings accounts.

Monthly interest credit accounts:

Interest is credited every month, utilising the power of compounding.

IDFC FIRST Bank's savings accounts tick all these boxes—one of the highest interest rates in the industry, zero-fee banking, and monthly interest payouts.

Let your money work for you—even while you sleep.

How to optimise savings accounts for higher earnings

Follow these tips to get the best out of your savings account and generate passive income:

Have a healthy balance:

Interest income grows with maintaining balance.

Select the correct account type:

Choose high-interest savings accounts that compound more often.

Make savings automatic:

Set up an automatic deposit from your salary or business profit.

Avoid idle funds:

Redirect unused funds to your high-yield savings account for increased gains.

IDFC FIRST Bank assists in maximising your returns with various savings options based on average monthly balances. The Bank provides attractive interest rates and effortless digital banking facilities to track and increase your wealth.

Tax implications and considerations

Interest earned on saving accounts is taxed under the "Income from Other Sources" category. But under Section 80TTA, you can claim a deduction for interest income up to ₹10,000 (₹50,000 for senior citizens). If the interest is even higher, it will be fully taxable based on your tax slab. Make sure to track the interest earned each year and report it accurately while filing your income tax return.

Common mistakes to avoid when using savings accounts for passive income

Overlooking interest rates:

Many people settle for 2.5–3% returns. Look for high-yield savings account options to grow your money.

Keeping funds idle:

Unused funds in current accounts earn nothing. Instead, transfer them to savings accounts and earn interest.

Not checking bank charges:

Hidden charges can eat into your profits. With IDFC FIRST Bank’s zero-fee banking, this threat is completely eliminated.

Conclusion

Savings accounts can prove to be effective tools for generating passive income if selected well. With high interest, monthly compounding, and no maintenance charges, IDFC FIRST Bank is redefining the meaning of "save smart." Whether you're saving for a rainy-day fund or saving for the long term, let your money grow passively with the convenience, security, and flexibility you deserve.

Frequently Asked Questions

Can I actually earn passive income from a savings account?

Yes, particularly with a high-yield savings account, as it gives higher interest and compounding options.

Which is the most suitable kind of savings account to earn passive income?

High-interest or sweep-in savings accounts providing monthly interest credits, such as those offered by IDFC FIRST Bank are best-suited for earning passive income.

How often is interest credited to IDFC FIRST Bank's savings accounts?

Interest is credited every month, allowing you to earn even more through compounding.

Are high-interest savings accounts subject to charges?

IDFC FIRST Bank provides zero-fee banking, allowing you to maximise your savings.

Is the interest on savings accounts taxable?

Yes, however, you can avail a ₹10,000 deduction under Section 80TTA. The remaining amount is taxed according to your slab.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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