When it comes to banks, we are all about banks and the system it provides when you visit or open a bank account. Bank and money are the words we commonly use in our daily lives, when we put our money in the bank we take it as the safest way. The bank offers the system under different types of deposits and accounts. In this article, we will understand different deposits & applicable tax benefits.
When we talk about Saving Bank Account as it says it is suitable for people who want to save some money from their salary and have a fixed income so they can save every month. The account can be opened at any bank but the bank keeps a certain balance which must be kept in the bank account. The deposit amount can be small and can be easily opened. The interest rate on this type of account will vary from one bank to another and the minimum amount to be deposited may vary from bank to bank. A person who wants to withdraw money from this account can fill out a withdrawal form or withdraw a check or by using an ATM can withdraw money from this account. And through net banking, they can use these accounts. You can also link GPAY, BHIM, PAYTM, etc., and these accounts. These are the most widely used accounts among people.
Here, interest accrues on a tax-deductible amount under the heading “Revenue from Other Sources”.
Provided that interest applies to seizures under Section 80TTA up to Rs. 10,000. So basically interest earned over Rs. 10,000 tax if you are an ordinary citizen. If you are a senior citizen you cannot claim a profit of 80TTA, but you can claim the same profit under 80TTB and get to the level of Rs. 50,000.
Current Deposit Account
These types of accounts are suitable for a business, corporate, and institution like schools, colleges, and hospitals. In this type of deposit, a person can withdraw the amount easily and the savings bank account has some restrictions on improper withdrawal of the person mentioned above. Even with this type of account, you have to keep the minimum amount in the account. Here, the bank does not charge any interest on the balance amount after withdrawal, but the account holder must pay a certain amount at the end of the year as a transaction fee.
TAX BENEFITS: An account opened under a Current Deposit Account, does not pay tax in full as the owner does not receive interest on this type of account. However, the owner must pay income tax on the proceeds from this account.
Recurring Deposit Account:
The account under this program can be opened alone or in the partnership or with a child caregiver. There is a limited time limit. The full amount and the same interest will be charged on maturity. The account holder can also withdraw the amount before its maturity, the interest rate will be lower in this case and different from bank to bank. The interest rate earned by a person in this type of account is higher than the savings account but lower than the fixed deposit account.
TAX BENEFIT: The deposit account attracts 10% TDS as a deduction on returns received if the total interest rate is more than Rs. 10,000.
Fixed Deposit Account:
Some people want to save their money by earning a higher interest rate, so they save on a fixed deposit account as banks give more interest on this type of account and save a bank account. Here, the customer can save from less than 7 days to 10 years and can withdraw the price as it grows. However, the amount can be withdrawn before its maturity if the customer applies to the banks. The only thing here is that if you withdraw money before maturity it will attract a lower interest rate. The customer can renew overtime or withdraw money at the end of maturity.
TAX BENEFIT: There is a scheme called tax-saving fixed deposit account where a person may require a deduction of up to Rs. 1.5 lac annually under Section 80C of the Income Tax Act. The lock period is 5 years and the interest rate is 5.5% to 7.75%.
With the daily advancement of technology and advances in digital payments, banks provide online banking. You can open any of the above-mentioned online banks and deposit and withdraw money online. You do not have to go to the bank every month to check your account balance or to update your passbook.
Everything can be done online very easily. You can check transaction details and account balances online. With investment options such as a fixed deposit where you get a good interest rate, you can save your money and get guaranteed profits. Fixed deposits are ideal for those who want to invest to achieve their long-term goals. Even with a savings account, you get a decent interest rate, and you can save money. Repeated deposits are ideal for those who want to invest a fixed amount over a regular period.
Hope you have understood different deposits & applicable tax benefits. Every account has its advantages and disadvantages and it is up to you what type of account you need.
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LegalWindow.in is a professional technology driven platform of multidisciplined experts like CA/CS/Lawyers spanning with an aim to provide concrete solution to individuals, start-ups and other business organisation by maximising their growth at an affordable cost.