There are several types of bank accounts in India that you should also check out carefully. From students to entrepreneurs and salaried professionals or NRIs, a bank account is a necessity and absolutely mandatory at the same time.
Types of Bank Accounts
Based upon the transactional frequency, purpose, and location of the account-holder, there are various kinds of bank accounts that you can avail of. Here’s taking a closer look at the same:
The current account is a deposit account for owners of businesses, traders, and entrepreneurs who have to make payments and receive them more frequently than other people. These accounts have more liquid deposits without any limits on the number of transactions each day. Current accounts also get the overdraft facility which means withdrawing more money than what you have presented in the account. Unlike the savings account, where you earn interest, these accounts do not come with any interest. You have to maintain the minimum balance as well.
- Savings Account– This is the basic and staple type of bank account in India. This is a regular account for deposits of your savings and you will earn a minimal interest rate on the money likewise. The number of transactions you make every month will remain capped. Banks offer several types of savings accounts depending upon the depositor type, product features, purpose of holding the savings account, age, and more. There are savings accounts for children, women, senior citizens, institutional accounts, family accounts, and more. You can choose from various products including those with facilities like bill payments, debit cards, and auto-sweep among others.
- Salary Account– This is one of the commonest types of bank accounts in the country. This account is the one opened as part of the tie-up with the bank by your company/employer. This is the account where all employee salaries are credited at the start of every month or payment cycle. Employees may choose their salary account type on the basis of features that they desire. The bank where you have your salary account will also maintain accounts of reimbursement; this is where the reimbursements and allowances are credited.
- Fixed Deposit Account- Bank fixed deposit accounts help in parking surplus funds and earning a good rate of interest on the same. FDs help in earning good interest on a particular amount kept locked for a specified duration till maturity. This may vary between 7 days and 10 years. The interest rate is majorly dependent upon the tenure of the deposit. You cannot withdraw money prior to the date of maturity. Premature withdrawal may be availed in emergencies by opting to earn a lower interest and forking out penalties.
- Recurring Deposit Account– A Recurring Deposit or RD comes with a duration that stays fixed. You have to invest a fixed amount regularly in this account, i.e. once every quarter or month, for earning interest on the scheme. You can invest smaller amounts regularly and more frequently in RDs. You cannot change the RD tenure and the amount that you will invest every month or quarter. Even in the case of RDs, you will have to bear penalties by way of a lower rate of interest for prematurely withdrawing the same. The maturity period of the RD may hover between 6 months and 10 years.
- NRI Account– There are various account types for NRIs or non-resident Indians living abroad. These are called overseas accounts and they include two kinds of savings accounts and fixed deposits, namely NRO or non-resident ordinary and NRE or non-resident external accounts. Banks also provide foreign currency non-resident fixed deposit (FD) accounts. Let us look closely at the types mentioned here-
- NRO accounts– These accounts are usually rupee-based accounts. Whenever an NRI deposits money into this NRO account, mostly through foreign currency, it will get converted into the Indian rupee (INR) at the applicable rate for exchange. NRIs may park surplus money earned by them in India or globally in these bank accounts. Payments such as maturities, rent, and pensions, among other types, maybe dispatched abroad via these NRO accounts as well. Income earned on the deposit accounts will be taxed accordingly.
- NRE savings accounts or fixed deposit accounts– NRE deposit accounts are quite similar to NRO accounts and funds kept in these accounts will also be maintained in Indian rupees or INR. Money deposits will be converted into INR on the basis of the exchange rate which is applicable. However, these accounts are only valid for parking the earnings from global countries. The funds, both interest, and principal will remain transferable. Yet, an interest that you earn on these deposit accounts will not undergo taxation in India.
- Foreign Currency Non-Resident (FCNR) accounts– These accounts are maintained with foreign currency. The interest and principal are transferable although the interest earned will not be taxed in India.