Standard Interest Application

• Most banks offer standard savings account interest rates on Minor’s Accounts.
• These rates are the same as those provided to regular individual accounts.
• Interest is calculated on a daily balance basis and paid quarterly.
• No additional or preferential rate is provided solely for being a minor.
• The rate may vary slightly between banks and account types.

Bank-Specific Schemes

• Some banks offer special minor-focused savings plans with fixed deposits.
• These may include higher interest rates for long-term goals like education.
• Such schemes are usually linked to recurring or fixed deposit accounts.
• Promotional interest rates may be time-limited or conditional.
• It’s important to compare across banks for minor-specific benefits.

Recurring Deposit Linked Benefits

• Banks may encourage monthly deposits with recurring deposit accounts for minors.
• These accounts offer better returns than standard savings accounts.
• Interest rates align with current RD rates applicable to all retail customers.
• Premature closure and partial withdrawal may impact the final return.
• Guardian consent is required to set up or manage these deposits.

Interest Crediting and Monitoring

• Interest earned is credited directly to the minor’s account.
• Compounding helps grow savings when funds remain untouched.
• Parents or guardians should track interest to monitor account growth.
• Statements or passbooks reflect periodic interest credits.
• Digital access allows regular updates and interest review.

Tax Consideration on Interest

• Interest earned on Minor’s Accounts is clubbed with the guardian’s income for tax purposes.
• Exemption of up to ₹1,500 per minor per year is allowed under Section 10(32).
• Excess interest is added to the guardian’s taxable income.
• Guardians should maintain records for tax filing.
• PAN of the guardian is linked to the account for reporting compliance.