Salary accounts are a type of special bank account available to employees. It is convenient for the company to pay the employee a monthly income, and a salary account simplifies employers while providing unique services and workplace perks to the workforce. Furthermore, employees will easily access modern mobile banking and internet banking services.
Hence it might not be wrong to say that a salary bank account is one of the first benefits recruited company employees usually receive from their contractors. Employees must complete a request form, which is then forwarded to the bank by the employer for the salary account to be opened. The employer deposits the employee's monthly salary into this bank account.
How to create a salary account?
To create an account for employee salary payments, an institution (employer) must enter a deal with a bank. Employers pay a lump sum to transfer employees' salaries into their respective accounts each month. If employees do not already have an account with the bank they operate, the boss will assist them in opening one. As a result, anyone can open a salary account. However, the relationship between the company and the bank is one of the requirements for opening salary accounts.
Understanding the benefits and purposes of salary accounts
Here are some of the prominent advantages of opening a salary account:
1. Zero minimum account balance
A salary account is usually a zero balance account. It implies that you can open a salary account without any minimum balance, and account-holders don't need to bother about maintaining their account balance beyond a specific limit or damages. In addition, the zero balance nature of a salary account offers salaried employees more flexibility concerning how they handle their money.
2. Personalized cheque book and debit card
Employees also get an ATM card facility which they can employ for money withdrawals at ATMs and offline/online debit card payments. In addition, account-holders also get personalized cheque books for lump-sum payments.
3. Mobile banking and online fund transfers
Account-holders can also effortlessly receive or send money globally with a salary account. It reduces the demand for cash withdrawals or cheque deposits to make the fund transfer. In addition, some banks and financial institutions also offer mobile and net banking services that allow account holders to handle transactions from the convenience of their homes.
4. Better investment services
The account holders can readily invest their funds in government bonds, mutual funds, life insurance products, and more through salary accounts. In addition, a Demat account can also connect to the salary invoice for trading and stock investments.
5. Easy loan availability
Banks and financial institutions also present quick access to a wide spectrum of loans to salary account holders. So whether you are looking for a car loan, personal loan, or home loan, maintaining the salary account in the same bank or financial institution will make the documentation procedure more effortless and faster. In addition, even the interest rate is usually more competitive for existing account holders.
Difference between a salary and a savings account
Savings and salary accounts serve distinct functions. In addition, a savings account aids in financial management by storing or parking cash, and your employer will use a salary account to credit your paychecks.
Salary accounts are not required to maintain a minimum balance, which is why they are also known as zero balance accounts. On the contrary, banks necessitate you to keep a certain minimum balance in your savings account. Failure to keep a sufficient minimum balance may result in penalties.
In addition, if there are no transfers in your salary account for three months, the account is converted into a savings account. You will then be required to meet the discount minimum balance requirement. Furthermore, since savings accounts are not used, there is no conversion. For instance, assume that you want to transform your savings account into a salary account. In that case, it is possible if your new employer already has a financial relationship with the same bank where you have your savings account.
Only a company or a partnership firm can open a salary account. This account is typically unavailable through your preferred bank because it is provided through a partnership between your employer and the bank. Likewise, your employer will only unlock one salary account for you. A savings account is a type of personal account that allows users to manage their money. If you prefer, you can open a savings account with any bank.
A salary account is typically an individual record, which means you cannot open it collectively with another person, and you are the primary signer. However, when it comes to savings accounts, you can open them collectively with others, such as your spouse, parents, or children. The bank opens a salary account at the invitation of a company for staff to credit the salary. A person can open this account with a bank with which the company has a connection for such accounts.
It is significant to mention that only company employees are qualified to enter this account with the bank. So to open a fixed deposit, an individual must provide proof of employment and other required documents. A salary account comes with countless benefits and offers the account holder can take advantage of. On the other hand, a savings account can be opened by anyone who completes the required KYC.
Since there is no corporate tie-up, this account is not dependent on the person's work status. A savings account's primary purpose is to provide individuals with a way to save money each month while meeting their banking needs. Banks provide various services and benefits depending on the type of savings account held.
While both accounts have advantages, a salary account has no minimum balance requirement, and the account owner can enjoy the advantages as long as there is a regular tribute of salary. If the salary is not received, the account is automatically converted into a regular savings account.
The bottom line
To summarize, while salary accounts are a kind of savings account, some features and advantages make them advantageous compared to savings accounts. Therefore, make sure you compare the benefits and features of both salary and savings accounts and close or convert the account accordingly.
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Frequently Asked Questions (FAQs)
- What are the documents required to open a salary account?
Here is a list of documents required to open a salary account:
- Introduction by the business (Signed and stamped by the authorized signatory)
- Address proof
- Photocopy of the Pan Card
Any one of the following records will serve as valid identity or address proof:
- Aadhaar letter/card
- Driving License
- Voter ID card
- PAN intimation letter
- Job card printed by NREGA
- Is there any applicable interest to the savings in the salary account?
As the employer opens the salary account with a bank or financial institution to credit the employees' salaries, there is no interest rate applicable on the sum maintained in the account.
- What are the best banks to open salary accounts?
Here are some of the top salary account schemes by leading banks in India.
- Jupiter Salary Pro Salary Account:
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- Kotak Salary Account Platina
A salary account can be opened at Kotak Mahindra Bank. Even if you establish this salary account with no balance, it is still dependent on the monthly income credit. It is easy to acquire the highest interest rate of up to 4% on payment accounts.
You can also freely transfer money from this salary account using NEF, IMPS, or RTGS. For this, you can make a free demand draft and keep it on hand at any bank branch. Opening up to three savings accounts per family is feasible in tandem- with your salary account at Kotak Platina, with no maintenance costs.
Using the bank's free feature, you can oversee your salary profile from home or the office. You can also save 25% on the cost of renting a locker to hold your belongings. You can initiate transfers using the debit card they offer at any VISA ATM in India. If you pay for fuel with a debit card, you will be qualified for a 2.5 percent fuel tax deduction regardless of which petrol station you use in India.
- Classic Salary Account from HDFC Bank
To be eligible to apply for this account, you must work at any institution or corporate office that has a salary-based profile with HDFC Bank. It is a pay-per-hour account that provides the account holder with numerous benefits. You can get a free debit card with points that can be rescinded daily from ATMs in the- home market up to Rs. 1 lakh. Domestic transactions have a daily limit of 3.5 lakhs. Additionally, by using- this bank's online banking option, you can change the HDFC debit card constraints to meet your needs.
The Times Points Debit Cards are a loyal virtual program offering discounts on restaurants, internet ordering, and other food store purchases. When you buy a debit card with Times Points, you can get tempting rights and services. You can start with a 500 Times Points entering bonus on your first purchase, utilising this at the juncture of online sale. Many other banks, like HDFC, offer fantastic loan programs if you lack investment in starting your own business.
- Corporate Salary Account from SBI
The State Bank of India, India's largest public-sector financial institution, offers salary-based accounts (SBI). CSP, or enterprise salary plan of salary accounts, provides numerous benefits. Employees of corporate organisations such as hotels, hospitals, and transportation services, among others, are eligible for numerous benefits. Your benefits are determined- by your earnings.
You can activate a salary account at SBI for free and make unrestricted withdrawals from ATMs of any bank. When combined with the SBI Credit Card, it also provides bundled benefits. As a reward, you could receive a personal accident insurance policy worth Rs. 20 lakhs. Furthermore, under air accident- insurance, you can protect yourself up to 30 lakhs. SBI also offers education loans, housing loans, personal loans, car loans, and other services.
- Salary Account from Citibank Suvidha
Generate a Citibank Suvidha Salary account, which is tailored to the financial requirements of today's experts. When you access a salary account, you can receive a discount on Citibank products such as private loans, credit cards, car loans, and housing loans.
It is also possible to obtain a reliable debit card for payment transactions and 24-hour access to user-friendly online banking systems. It is a one-stop-shop for all of your banking requirements. With your Citibank payroll account, you will have access to an account with a pay-at-par cheque book and a debit/ATM credit card.
- Axis Bank Prime Salary Account
Using an Axis Bank Prime Salary Account, you can get more transfers, credit cards, free Visa Rewards, discounts at participating restaurants, medical negligence insurance, cashback on movie tickets, and so on. To open an Axis Bank Prime salary account, go to your nearest Axis Bank branch or the online site.
If you open a salary account with Axis Bank, you will receive a credit or debit card with a breathtaking 15% discount at partaking restaurants to enjoy your dinner. The Axis Bank Rupay Platinum Debit Card allows you to withdraw up to 40,000 from your account daily and spend up to 2 lakhs per month.
- Is it safe to save money in a salary account?
It is more than safe to save money in a salary account. In addition, you can use the salary account for all monthly payments and savings. Moreover, many banks offer the benefit of free transactions to the person.
- What do we mean by reimbursement account?
Companies can disburse the reimbursements payable to the employees through a zero balance account, termed a Reimbursement Account. In addition, organizations will not have to spend time standing in a line to collect their refunds. It further assists businesses in filing their tax returns.