Current Account: Features, Benefits & Tax Implication
Current account is a kind of deposit account, which is maintained by business entities to conduct their multiple bank transactions daily. It is a no interest account that permits unlimited withdrawals and deposits. The account aids businesses with a huge volume of cheque leaves, pay orders, and demand services at nil to nominal expense. Like big scale organizations, start-ups, freelancers, and small organizations too can benefit on maintaining a current bank account. However, the account holder is required to maintain a higher minimum amount balance than savings bank account.
Note that such accounts are also called liquid deposit accounts, which provide different customized options to aid at times of financial requirements. One of the biggest current account benefits is that the account holder can avail the overdraft facility online up to the agreed limit.
Features of current account
Current account is one of the major requirements for beginning any business. Nowadays, banks provide several attractive benefits and offers on the current accounts to match up diversified business requirements. Here are some of the crucial features of current account:
· Current account permits transactions over and above the scope of savings bank account.
· In comparison to a savings account, a current account needs a higher minimum amount balance.
· It is formed to facilitate constant transactions – receive cheques, transfer funds, cash etc.
· Such accounts can be managed by any individual, public, proprietary concerns, trusts, associations, private companies etc.
· There is zero restriction on the number of transactions in a day.
· Non maintenance of minimum amount balance can levy penalty charges.
· Like savings bank accounts, KYC guidelines require to be followed also for the current account.
· A single business cannot have multiple current accounts.
· Prime goal of the current account is to make smooth business transactions.
Current account benefits
· Permits prompt business transactions
· Allows businesses to conduct direct payment through demand drafts, cheques or pay orders
· Zero limit on cash withdrawals
· Zero limit on cash deposits
· Offers overdraft facility
· Provides mobile banking and internet banking facilities
Tax implication on current account
While all the daily business transactions are performed from current account, this account is tax free in nature owing to generation of no interest on it. However, the businesses are required to pay the income tax on funds earned by them through different sources.
Current accounts are extremely popular among firms, companies, public enterprises etc., which usually conduct higher regular transactions with banks. The account has no limit on withdrawals, deposits, and contra transactions. As mentioned above, they are zero interest accounts because of the fluidity they present and as a result, they are tax-free in nature.