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Types of Bank Accounts

Saving bank account

  • Any individual or HUF can open a saving bank account.
  • Normally these accounts are intended for the personal use but it can also be used for business purposes which have few business bank transactions.
  • Offer nominal interest on the funds parked in these account.
  • Interest up to Rs 10,000 is exempt from tax u/s 80TTA. Excess amount shall be chargeable as per normal slab rate applicable to the account holder.

Current bank account

  • Any person (individual, HUF, company, firm etc) can open a current account.
  • Normally these accounts are intended for business purpose.
  • They do not offer any interest on the fund lying within bank account.

Fixed deposit bank account (Time deposit bank account)

  • Fund will be deposited for a fixed period of time.
  • Bank provide highest rate of interest on this type of account.
  • Mostly bank pays quarterly interest on the amount deposited.
  • Some bank imposes penalty charges in case of premature withdrawal.
  • TDS is applicable if the amount of interest exceed Rs 10,000

Recurring deposit account

  • A fixed amount will be deposited in the account each month for the fixed period of time.
  • High rate of interest.
  • Normally intended for earning good rate of interest on the small savings.
  • TDS is not applicable but interest is taxable on due basis.

Non resident external (NRE) account

  • A person who is NRI or a person of India origin (PIO) can open this type of bank account.
  • NRE account may be in form of saving bank account, current account, fixed deposit account or recurring deposit account.
  • The currency of the bank account is INR.
  • TDS is not applicable as interest earned is exempt from tax.
  • Wealth tax is not applicable on such account.
  • For more information please click here.
    http://www.rbi.org.in/scripts/FAQView.aspx?Id=52#F2

Non resident ordinary (NRO) account

  • A person who is NRI or a person of India origin (PIO) can open this type of bank account.
  • NRI account may be in form of saving bank account, current account, fixed deposit account or recurring deposit account.
  • The currency of the bank account is INR.
  • TDS is applicable as interest earned is not exempt from income tax.
  • For more information please click here.
    http://www.rbi.org.in/scripts/FAQView.aspx?Id=52#F2

 Foreign currency non resident (FCNR)

  • A person who is NRI or a person of India origin (PIO) can open this type of bank account.
  • FCNR can be only in form of fixed deposit of account for a period of 1 to 5 years.
  • It can be open in any currency.
  • For more information please click here.
    http://www.rbi.org.in/scripts/FAQView.aspx?Id=52#F2

SWAP Account

  • Additional feature accompanied with saving and current account.
  • Excess amount in saving or current account, above the limit specified will be transferred to term deposit for a period less than 180 days.
  • Once the balance of the saving or current account reduces below the limit specified, term deposit will break automatically to maintain the balance in the saving account.
  • TDS is applicable if the amount of interest from Swap exceeds Rs 10,000.

About Rohit Pithisaria

I am a Chartered Accountant based in Jaipur. I do have interest in Income Tax and managing the income tax related section on TaxAdda. You can email me on info@taxadda.com for your queries related to income tax.

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