By ‘sweep-out’ and ‘sweep-in’ services, your savings account will get a higher interest rate on the idle money sitting in your account. So much do you earn on your Savings Bank account? Okay, the basic purpose of holding money in a bank account is to maintain liquidity or take care of your daily expenses in times of contingencies. So if your savings account can get a higher interest rate on your account ‘s idle money, it’s sure to be an icing on the cake. Ask your bank to gain marginally more on your savings bank account for ‘Sweep-out’ and ‘Sweep-in’ facilities.
Each bank in our country provides this special savings account with an automatic sweep-out facility where a fixed deposit is put on surplus funds. And in case you need the money or your bank account starts running low on cash, you must immediately cancel the fixed deposit to meet the short fall. That way your money in your bank account never lies idle. Having a related fixed deposit guarantees higher earnings as opposed to the standard savings bank interest rate through a higher interest rate.
The most compelling part of this facility is that you don’t need to constantly monitor your idle funds and give the bank guidance to establish term deposit out of your savings account. It inevitably happens. During the time of using this facility, you have to tell the bank once. To identify excess funds in your account you have to determine the threshold. In certain cases, the banks have between 10,000 and up to 1 lakh a fixed level of anywhere. If your account balance exceeds the mark, the banks must build FDs for the surplus. Depending on the bank, the FD ‘s term may be from one year and five years. If the FD matures, the Bank must auto-renew it.
This service can be clubbed with other bank accounts as well as women and children ‘s special accounts etc. For the savings account providing the sweep-out facility, each bank has a different name. Namely, HDFC Bank calls it ‘MoneyMaximize from HDFC Branch,’ SBI calls it ‘Savings Plus Account,’ and Branch of Baroda calls it ‘Edge Savings Account.’ The interest received on a fixed bank deposit is paid according to the slab rate that applies to you.
Thus, taxpayers falling into the highest tax bracket could not benefit from this facility. Interest received up to a distance of 10,000 can be reported as a deduction in a savings account under Income Tax Section 80TTA. Every interest received in respect of this is taxable according to the slab rate applicable.