Difference between Salary Account and Savings Account
Both Salary Account and Savings Account serve as important banking tools in India, they cater to different needs. Savings Accounts are suitable for individuals looking to save and manage personal funds, while Salary Accounts are specifically designed for employees to receive their salary payments. The accounts differ in terms of eligibility, balance requirements, fees, interest rates, and services offered. It's crucial for individuals to assess their financial requirements and choose the account that aligns with their needs and preferences. Summarized below is a comparison table between Savings Account and Salary Account in India:
Salary Account Vs Savings Account
| Categories | Salary Account | Savings Account |
|---|---|---|
| Purpose | Receiving salary payments | General banking needs and savings |
| Who can open | Requires employment with a corporate entity that has a salary account relationship with the bank | Can be opened by anyone irrespective of his/ her employment status |
| Salary Credits | Mandatory | Not mandatory |
| Usage | Primarily used for salary credits and associated banking activities | Can be used for personal and business transactions |
| Balance Requirements | Zero or low balance requirements | Minimum balance needs to be maintained on monthly/ quarterly basis which varies across banks |
| Interest Rates | Interest between 3-6% paid, mostly similar to savings accounts | Interest between 3-6% paid, sometimes higher than salary accounts |
| Minimum Balance | Zero or low | Usually higher |
| Debit Card | Provided | Provided |
| Cheque Book | Provided | Provided |
| Credit Card | Many banks offer complimentary credit cards under salary accounts for high earners | Complimentary credit card is usually not offered |
| Overdraft Facility | Some salary accounts provide an overdraft facility which can be used in case of emergencies | Not provided |
| Auto-Sweep Facility | Provided | Provided |
| Withdrawal Limit | Usually higher limits | May have limitations |
| Bank-Employer Partnership | It must be there in order to open the account | No specific requirement |
| Loan Facility | Salary accounts can increase your eligibility for various types of loans | Sometimes pre approved loans can be offered by the bank |
| Employee Reimbursement Account | Can be opened only if you have salary account | Not provided |
| Special Offers | Exclusive offers for salaried customers | Varies across banks |
| Account Conversion | Can be converted to savings account | No specific requirement |
| Additional Features | Online banking, salary credit | Online banking, bill payments, etc. |
| Fees & Charges | Often comes with reduced or waived fees for various services, including account maintenance, transactions and more | May charge nominal fees for specific services such as ATM withdrawals, chequebook issuance and account maintenance |
| Penalties | Zero balance requirements hence non-maintenance charges are not applicable | Non-maintenance charges, if applicable |
| When to Close? | When employee leaves the existing job | It can be closed anytime |
While both Salary Account and Savings Account serve specific purposes, they differ in various aspects. Savings Accounts are designed for general banking needs and savings, offering higher interest rates and may have higher balance requirements. On the other hand, Salary Accounts are exclusively used to receive salary payments, with zero or low balance requirements. They typically have similar interest rates to savings accounts and may offer additional benefits like special offers and exclusive services for salary customers.
Similarities Between Salary Account and Savings Account
- Both accounts can be opened quickly and with minimum documentation
- Both accounts provide interest on deposits, usually similar
- Both accounts provide Debit Card, Cheque book and Passbook facility
- Both accounts offer internet banking and mobile banking facilities
- Alert and notifications for transactions are sent in both the accounts
- Tax rebate under section 80TTA of the Income Tax Act can be availed in both the accounts
- One can deposit, withdraw and transfer funds into and from his/ her account as per need from both the accounts
Savings Accounts often require a minimum balance, while Salary Accounts may have no minimum balance requirement. Both types of accounts provide debit cards and chequebooks for convenient transactions. Withdrawal limits can vary, with Salary Accounts often allowing higher limits to cater to monthly salary transactions.
In India, individuals may transition from a salaried position to self-employment, change of job, start a business or retire. On any of such ocassions, converting a salary account to a savings account becomes necessary. Banks offer a smooth and easy process for this conversion which allow account holders to continue enjoying banking services without any disruption.
Conversion to a regular savings account is not necessary for a salary account as long as regular salary credits are available. However, if an individual no longer receives salary credits, the Salary Account may need to be converted subject to specific rules set by the bank.
Convertion of Salary Account to Savings Account
Converting a salary account to a savings account means a smooth transition without the need to open a new account or disruption of banking activities. To convert salary account to a savings account following process needs to be perform,
- Step 1: The account holder needs to visit his bank branch.
- Step 2: Submit a request for the conversion.
- Step 3: He needs to fill out a form or write an application stating the intention to convert the account type from Salary Account to a Savings Account.
- Step 4: The bank will require supporting documents such as identity proof, address proof and any other documents specified by the bank for updating customer information.
- Step 5: Once the conversion request is submitted, the bank will verify as to everything is correct and then initiate the necessary changes in their system.
- Step 6: The Salary Account is then reclassified as a Savings Account with the account number and associated services remaining the same.
It's important to note that penalties can be imposed by bank for non-maintenance of the minimum balance in both types of accounts, although the specifics can vary between banks.