TYPES OF SAVINGS ACCOUNTS

TYPES OF SAVINGS ACCOUNTS

Savings Account is an account with a bank or post office where one can deposit the money and use it as per requirement.

Types of Savings Accounts

Savings Account is an account with a bank or post office where one can deposit the money and use it as per requirement. There are various types of savings account that are available in the market today. Majorly they could be classified into:

  • Savings Account
  • Fixed deposit Account
  • Recurring deposit Account
  • Public Provident Fund Account (PPF);
  • Sukanya Samridhi Account (For Girl Child);
     

Savings Account

Savings account is an account where one can save his extra money in the bank and earn interest on it. Advantages of having a savings account are as below:

  1. Savings accounts earn interest on the amount so deposited. The rate of interest is decided by each bank.
  2. One can apply for a debit/credit/shopping/ATM card.
  3. One can also avail net banking, mobile banking, SMS banking kind of services on it.
  4. Savings account holder can apply for a cheque book. 
  5. Some private banks require minimum balance to be maintained in a savings account, however, government has introduced no frills account, where by one can maintain a savings account even without any balance. 
  6. There is no limit on the amount of money that can be kept in a savings bank account in India.
  7. There is a limit on per month withdrawals from a savings account.
  8. Cheques, withdrawal slips and ATM cards can be used to withdraw the amount.
Savings Bank accounts can be opened by eligible persons except in the name of
  • Government departments ;
  • Bodies depending upon budgetary allocations for performance of their functions; 
  • Municipal Corporations or Municipal Committees ;
  • Panchayat  Samitis; 
  • State Housing Boards ;
  • Water and Sewerage / Drainage Boards ;
  • State Text Book Publishing Corporations / Societies ;
  • Metropolitan Development Authority ;
  • State / District Level Housing Co-operative Societies, etc. or;
  • any political party or any trading / business or professional concern, whether such concern is a proprietary or a partnership firm or a company or an association.
     

Fixed Deposit Account (FD)

A fixed deposit account is an account where one could save lump sum money for a specified period of time. Such account earns higher interest as compared to a savings account and a person is also eligible to a loan of specified amount against a fixed deposit account. This account does not come with a check book. The money so deposited could not be withdrawn before the expiry of specified period; however, if one wished to withdraw money before the expiry of contracted period then he may have to face a penalty by way of reduction in his interest income.

Advantages of a Fixed Deposit Account
  1. Loan upto 75% of the amount deposited could be procured against an FD.
  2. FD Account holders can earn higher interest income as compared to a savings account.
  3. Fixed deposit could be opened in joint names also payable to either or survivor.
Disadvantages
  1. One cannot get a cheque book against an FD account.
  2. The Premature withdrawal of a FD attracts penal charges on interest.

Recurring Deposit Account (RD)

This account is for those who wish to save some fixed amount of money at regular intervals, like monthly , quarterly, haf yearly, annually, etc. while opening this type of account, a person is contracting to deposit a fixed amount of money at regular intervals with the bank. This account fetches a higher rate of interest and behaves like a fixed deposit account. The total deposited amount is paid with the interest at the maturity of the contract. However, if a person wishes to close it prematurely, he would lose the promised sum of interest. There is restriction to the withdrawals in this account and no cheque book is issued against such an account.

How to open a savings account?

For opening a savings account at any commercial bank one has to follow following procedure:

  1. Go the relevant bank and fill up the account opening form. The form would require details like name, occupation, residential address, signature of applicant and name, address, signature of person introducing the applicant to the bank.
  2. Some banks require personal introduction of applicant from a person who is already an account holder at the bank. However, other banks may require your identity proofs like driving licence, Aadhaar card, etc.
  3. After opening account, one can use ‘pay-in-slips’ to deposit cash into the account or a crossed cheque can also be used to deposit money into the account. These days money could be deposited using ATM/ debit card through ATM deposit machines as well.
  4. In order to withdraw the amount, one can go to bank and fill withdrawal form, or can withdraw money through a cheque or may even withdraw money using debit/ ATM card from an ATM machine.

Public Provident Funds (PPF)

PPF is a savings scheme account established by the Central Government of India. It is a safe, tax deductible investment with lucrative returns that are completely free from income tax provisons. However, it’s a long term saving scheme. The main return comes after the first maturity period, i.e. of 15 years.

Characteristics of PPF Account:
  • Safe Investment option;
  • Guaranteed returns which is backed by the Central Government;
  • The  best character is that this account cannot be attached to any kind of claim in case of debt or liability. So, the money will be yours for always.
     
Income Tax Benefits :
  • If the person opts for the old tax system starting from FY 2020-21, then there is a deduction of Rs. 1,50,000/- is available under Section 80C of the Income Tax Act,1961;
  • If the person opts for the new tax system starting from FY 2020-21, then there is no deduction available under the Income Tax Act,1961;

However, in either case, the withdrawal and maturity will be tax free.

Eligibility Criteria
  • An individual who is a resident of India can open a PPF account for himself;
  • An individual can open only one PPF account in his name either in Post Office or notified banks;
  • Joint Accounts are not allowed under PPF, however nomination facility is available.

Hence, PPF is a good option for saving money for future prospects or having a good retirement life and a safe investment option.

Sukanya Samridhi Account {SSA (For Girl Child)};

SSA is a “Girl Child Properity”scheme and it aims mainly for the higher education and marriage of a Girl Child.

Characteristics of SSA
  • Exclusively for girl child;
  • Safe and guaranteed returns;
  • Income Tax benefits;
  • Partial withdrawal facility for the higher education of girl child;
  • Full withdrawal facility for the marriage of girl child.
     
Income Tax Benefits:
  • If the person opts for the old tax system starting from FY 2020-21, then there is a deduction of Rs. 1,50,000/- is available under Section 80C of the Income Tax Act,1961;
  • If the person opts for the new tax system starting from FY 2020-21, then there is no deduction available under the Income Tax Act,1961;

However, in either case, the withdrawal and maturity will be tax free.

Eligibility Criteria:-
  • Parents or Legal guardian of a girl child can open the account in the name of the girl child;
  • SSA account can also be opened in the name of adopted girl child;
  • Age of girl should be less then 10 years, I,e 0- less then 10 years;
  • Girl Child will be treated as Account Holder;
  • Parents and Legal guardian will be termed as Depositor;
  • Girl child can operate the account by herself when she reaches 18 years of age.
  • Maximum 2 account can be opened for 2 girl child, more then 2 girls of single parent are not allowed under this category.
  • Account can be opened in notified banks and post offices.

Hence, SSA is great opportunity for the parents having girl child for her future as the interest rate are higher then any other option available in the market.
 

Edited By Akanksha Aggarwal

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