Once we’ve understood the concept of residential status in India, it’s essential to know the banking options available for individuals based on their status. In this blog, we will explore all major types of bank accounts and banking options available to a Resident Indian citizen, qualified as a “Resident” under Indian financial regulations.
Let’s walk through each of them in a simple and clear manner.
1. Savings Account
A Savings Account is the most basic and commonly used account. Its main purpose is to help individuals save money in a safe and secure place while earning a small amount of interest.
Interest Rate (ROI): Usually between 2% to 4% per annum, depending on the bank and the amount maintained.
Taxation: Interest earned above ₹10,000 in a financial year (₹50,000 for senior citizens under Section 80TTB) is taxable under “Income from Other Sources”.
Accessibility: Available to individuals, including minors (with restrictions) and Trusts, HUFs (subject to availability of documents).
Example:A college student opens a savings account to deposit monthly allowance and scholarship funds. Over the year, he earns ₹8,000 interest. Since it’s below ₹10,000, no tax is applicable.
2. Current Account
A Current Account is designed for business and professional use, not for saving purposes. It offers unlimited transactions and higher limits.
Who Can Open: Individuals, proprietorships, firms, companies or trusts having a valid business, with at least 2 Officially Valid Documents (OVDs).
Minimum Balance: Usually higher than savings accounts, varies by bank.
Interest: No interest is paid.
Example: A shop owner opens a current account to manage frequent supplier payments and customer receipts. It allows him to make unlimited daily transactions without restrictions.
3. Fixed Deposit Account (FD)
FD is a lump-sum deposit for a fixed duration. It’s popular among those who want to earn higher interest on idle funds.
Tenure: From 7 days to 10 years.
Interest: Varies with bank and tenure. Some banks offer higher interest to senior citizens.
Interest payout: Monthly/ Quarterly/ half yearly/ yearly or on maturity.
Premature Closure: Allowed, but penalty on interest may be charged.
Taxation: Interest above ₹40,000 (₹50,000 for senior citizens) in a financial year is subject to TDS (Tax Deducted at Source).
Example:A person invests ₹2,00,000 in a 2-year FD at 6.5% interest. She opts to receive the interest annually. She can close it early if needed, but the interest rate may reduce slightly due to penalty.
4. Recurring Deposit (RD)
A Recurring Deposit allows individuals to invest a fixed amount at regular intervals (monthly/ quarterly/ half yearly/ yearly) and is a great way to build a savings habit.
Tenure: Upto 10 years.
Interest: Similar to FD rates, varies with bank and tenure.
Taxation: Interest above ₹40,000 (₹50,000 for senior citizens) in a financial year is subject to TDS (Tax Deducted at Source).
Premature Withdrawal: Permitted with a penalty.
Example: A person deposits ₹2,000 every month for 5 years in an RD. Over time, the amount grows with compounded interest, and she gets a lump sum at maturity.
5. Overdraft Account (OD)
An Overdraft Account allows you to withdraw more than your account balance, up to a sanctioned limit. It can be secured (against assets) or unsecured.
Interest: Charged only on the utilized amount, not on the entire limit.
Security: May be given against Fixed Deposit, Gold, or Property.
Flexibility: Great for short-term liquidity needs.
Example: A person has an OD limit of ₹1,00,000 against an FD but uses only ₹30,000. He pays interest only on ₹30,000, not the full limit.
6. Cash Credit (CC)
Cash Credit is a facility provided only to businesses to meet working capital needs.
Security: Typically requires stock, receivables, or other assets as collateral.
Usage: To cover operational expenses, like raw materials, wages, etc.
Interest: Paid on the utilized amount.
Example: A small manufacturing unit takes a cash credit facility of ₹10 lakhs to manage inventory purchases and salary payments. Interest is charged on the amount used.
7. Salary Account
A Salary Account is a type of savings account where monthly salary is credited by the employer. It comes with additional benefits like zero minimum balance, offers on loans, etc.
Eligibility: Only salaried employees.
Interest: Same as a savings account.
Taxation: Interest earned above ₹10,000 in a financial year (₹50,000 for senior citizens under Section 80TTB) is taxable under “Income from Other Sources”.
Conversion: If salary is not credited for 3 consecutive months, it may be converted to a regular savings account.
Example: An IT employee receives a monthly salary in her salary account. She enjoys no minimum balance requirement and gets faster loan approvals with pre-approved offers.
Summary Table-
| Type of Account | Purpose | Interest | Who Can Open | Key Benefit |
| Savings Account | Save personal earnings | 2% – 4% | Individuals (including minor) and trusts, HUFs (subject to availability of documents) | Safe place to save + interest |
| Current Account | Business operations | None | Businesses professionals | Smooth business transactions |
| Fixed Deposit (FD) | Invest lump sum for fixed duration | Higher than savings | Individuals & Non-Individuals | Higher and fixed interest earnings |
| Recurring Deposit (RD) | Save fixed amount regularly | Similar to FD | Individuals & Non-Individuals | Build long-term savings |
| Overdraft (OD) | Withdraw excess funds temporarily | On used amount only | Individuals or Businesses | Temporary funding option |
| Cash Credit (CC) | Meet working capital needs | On used amount only | Only for businesses | Funds for business expenses |
| Salary Account | Credit monthly salary | 2% – 4% | Salaried individuals only | No minimum balance |
As a Resident Indian, you have a wide range of banking options based on your income, lifestyle, and financial goals. Whether you’re saving for the future, managing a business, or building your credit history, choosing the right type of account is the first step toward better financial planning.
Stay tuned to explore more!