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Firstly if we talk about banks, we all are about the banks and the scheme they provide if you have visited or opened an account in bank. Bank and money are the words we use normally for our day to day life, if we put our money in the bank we considers it to be safest mode.

Bank gives scheme under different types of deposit and account. In this article we will discuss about them in detail and we will also discuss the tax benefits you get under Income Tax Act.


Bank deposit may be classified as follows:

  • Saving Bank Account;
  • Current Deposit Account;
  • Fixed Deposit Account;
  • Recurring Deposit Account.

Now we will discuss this in detail,

Understanding Different Deposits And Applicable Tax Benefits Around It

1. Saving Bank Account

If we talk about Saving Bank Account as it says it is suitable for people who wants to save some money from their salary and who have fix salary so that they can save monthly. The account can be opened in any bank but the bank keeps some minimum balance that has to be maintained in the bank account. The deposit amount can be minimum and can be opened easily.

For e.g. the people who get salary or is a labourer can open a saving bank account easily.

The interest rate on this type of account will be different for every type of bank and the minimum amount that should be maintained can also be differ from bank to bank. The person who wants to withdraw money from this account can fill the withdrawal form or they can issue cheque or by using an ATM can withdraw the amount from this account. Also through the net banking they can operate these account. You can link GPAY, BHIM, PAYTM etc. also with these accounts. This is the most commonly used accounts amongst the people.


Here, the interest which accrues on the amount deposited is taxable under the head of “Income of Other sources”.

Provided that the interest is applicable for deduction under Section 80TTA up to Rs. 10,000. So basically interest earned beyond Rs. 10,000 is taxable in case you are a normal citizen.

If you are a senior citizen then you cannot claim the benefit of 80TTA, but you can claim the similar benefit under 80TTB and also to the extent of Rs. 50,000.


2. Current Deposit Account

This types of account is suitable for businessman, companies, institution like school, colleges and hospitals. In this type of deposit the person can withdraw the amount easily whereas the saving bank account has some restriction on withdrawal which is not suitable for this above mentioned person.

Even in this type of account you have to maintain some minimum amount in the account. Here, the bank don't provide any interest on the balance amount after withdrawal, but the account holder has to pay a certain amount at the end of the year as operational charge.


Account opened under Current Deposit Account, is wholly tax free as the holder is not getting any interest in this type of account. But, holder has to pay income tax on the income earned through the funds from this account.

3. Fixed Deposit Account

There are person who wants to save their money by earning at more interest rate, so they save into fixed deposit account as the banks give more interest rate in this type of account then saving bank account. Here, the customer can save from as low as 7 days to as far as ten years and can withdraw the amount on the maturity.

However, the amount can be withdraw before its maturity if the customer makes request to the banks. The only thing is here in case of withdrawing money before the maturity will attract lower rate of interest. The customer can renew for the further period or can withdraw the money at the end of the maturity.


There's a scheme called tax saving fixed deposit account under which a person can claim the deduction up to Rs. 1.5 lakh per annum under Section 80C of the Income Tax Act. A lock in period for this scheme is 5 years and the interest rate ranges from 5.5% to 7.75%.


4. Recurring Deposit Account

Account under this scheme can be opened individually or jointly or by the guardian of the minor. There is an amount fixed for a certain period. The total amount and interest on the same will be payable upon the maturity.

However, the account holder can also withdraw the amount before its maturity but, the interest rate will be lower in this case and differ from bank to bank. The interest rate received by the person in this type of account is higher than the saving bank account but lower than the fixed deposit account.

There are different type of Recurring Deposit Account as follows:

  • Home safe Account:
  • Cumulative-cum-Sickness deposit Account:
  • Home Construction deposit Scheme/Saving Account:


Recurring Deposit Account attracts a TDS of 10% as a deduction on the returns earned if the total interest is more than Rs. 10,000.

Authored by Adv Shivam Kumar

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