Difference Between Salary Account and Savings Account (SB Account) In A Bank

Most working people have wondered, how salary account can be different from a savings account, because at a glance both have the same features. However, they both are different accounts.

Now, let us understand the difference between a Salary Account and a Savings Account

Salary Account

As the name says, a salary account is basically opened by your employer to credit your salary. The speciality of this account is that there is no need to maintain minimum balance account hence it can also be called as zero balance account. This account is particularly designed for salaried class.

Some banks even have different types of salary account based on the salary you draw. However, the amount maintained in the account, will not be entitled for interest rate.

There are other facilities which are provided on the account such as higher limit debit card, some offers on loan, better credit card offers with higher limit.

However, one should keep in mind, if the salary does not credit for consecutive three months than the account is considered as savings account and minimum balance maintenance is required.

Savings Account

A Savings account can be opened by anyone, the main purpose of this account is to encourage savings.

There are different type of savings account based on the services you look and ready to maintain minimum balance.

In the savings account, if you fail to maintain minimum balance, then you will be charged with fee or penalty. This depends on the type of account and bank.

One can also transfer your savings account to salary account if your employer account is with same bank, provided if your bank permits.

	Salary account	Savings account
Who can Open	Employer	Anyone
Purpose	Credit of salary	To encourage Savings
Minimum Balance	No Minimum Balance	Minimum Balance Required
Convertibility	If the salary is not credit for 3 consecutive months, it is considered as savings account	One can convert to salary account , if the bank allows
Interest rates	No Interest paid	4%-6% interest is paid

One important difference to know, apart from the above is that a salary account may entitle you to an easier loan, as well as credit cards. This is because the bank has an assurance since the salary is being credited in their bank.

Tax implications on salary and savings account

If you thought that the tax implications on both the accounts were different, the answer is no. The tax treatment is the same for both these set of accounts. Since they are both Savings Bank Accounts, the interest would be exempt from tax to the tune of Rs 10,000.

What this means is that upto a sum of Rs 10,000, there would be no TDS that would also be deducted for these accounts. However, if you can show the interest earned on these deposits, when filing your tax returns.

Conclusion

Individuals who change their job frequently need to consider this. It may so happen, if they had changed the job and forgot to close the account, they they may be charged with penalty for not maintening the balance. So, it is advised to close the account.

For example, private sector banks charge a monthly charge of as much as upto Rs 300, if you do not maintain the minimum balance(Monthly Average Balance) in your salary account. It is therefore imperative to inform them.

Remember, the bank would never know that you have left your job and would hence never convert a salary account to savings account automatically.

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