Our times are so different from those of our parents and so is the way in which we earn, spend and save. As discussed in Parents & Us:Changes in the Way We Earn,Spend,Invest. Our parents(mostly fathers) worked in the same or at most two jobs in one career, they retired on their provident funds. But now people hop from one job to the other looking for better and lucrative job opportunities. But to ensure a smooth financial transition one needs to take care of our salary bank account, Tax computation, Employee Provident Fund(EPF), Health insurance etc. This articles focuses on exploring what to do with Salary Bank Account, Tax liability when ones switch jobs.
Salary Bank Account
If a salary bank account different from regular saving bank account. Yes Let’s see how by comparing HDFC bank Regular Saving Account and Regular Salary Account. Some of the differences are given below:
Bank Account | Regular Salary Account | Regular Saving Account |
Minimum Balance(Average Monthly Balance or AMB) | Zero Balance | Rs. 10,000 (Metro / Urban), Rs. 5000 (Semi-Urban / Rural) |
Charges on non maintenance thereof | Nil | For Urban / Metro branches:– If AMB in the account is between Rs 5,000 to Rs 10,000 – Rs 250/- per month would be levied. – If AMB is less than Rs 5,000 – Rs 350/- per month would be levied.Semi urban / Rural:– If AMB in the account is between Rs 2,500 to Rs 5,000 – Rs 250/- per month would be levied. – If AMB is less than Rs 2,500 – Rs 350/- per month would be levied. |
PAP Cheque book(Payable at Par*) | Free – 25 cheque leaves per calendar quarter
Additional chequebook of 25 leaves will be charged @ Rs 50/- per chequebook |
Free – 25 cheque leaves per calendar quarter Additional chequebook of 25 leaves will be charged @ Rs 50/- per chequebook Rs. 5 per leaf on non-maintenance of min. balance |
Debit Card – Annual Fee – Regular | Free | Rs. 100 per year (plus taxes) |
Debit Card – Renewal Fee – Regular | Free | Rs. 100 per year (plus taxes) |
PAP: Payable at par or MCC: Multi-city cheques
PAP or MCC cheques can be encashed anywhere in India, irrespective of the city they were issued in. They are treated as local clearing cheques across the country. The amount is credited in the account the same day and there are no inter-city collection charges associated with a normal cheques being encashed in another city. So a cheque issued at a branch in Chennai, can be encashed at a branch in Dibrugarh as if it were a local cheque.
There would be a notation(often Payable at Par) on the top or the bottom of a cheque indicating its status as as PAP or MCC cheque. Livemint’s 2010 Banking terms you must know & how to use them or bemoneyaware’s cheque webpage.
For more differences you can checkout HDFC bank website or compare the accounts at rupeetimes.com
What happens to your salary account when you change your job?
Once you change your job and your salary stops coming to your salary account, then within three to six months (depending upon your bank), you salary account will automatically be converted to a regular savings bank account by many banks(maybe without informing you). And then you are required to maintain a minimum balance in the account. Lack of regular maintenance and minimum balance could also invite penalty charges. So if you do not close your account and let it run say for two years with Average monthly balance of Rs 5000-Rs 10,000 you might incur a service charge of Rs 6000 for urban account as shown below:
Rs 250(per month) * 12(months) * 2(years) = Rs 6000
Upto 14 days – No Charge,
15 days-Upto 12 months – Rs 500 ,
Beyond 12 months – No Charge
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So If your new company opens a new salary bank account for you it would be better if you can close your old bank account. In the above example assuming you had a zero balance, you still might be asked to pay off Rs.6000/- just to close the account. Having many bank account’s means reporting interest from them in Income Tax as Income from other sources. Not including interest income in your tax return explains about how people skill adding about interest income in filling tax return form. In case your case came for scrutiny you might be asked for old bank account details. As Jagoinvestor’s book:Changing your relationship with money says for a simple financial life it is better to have 2-3 bank accounts only! For more information you can read DNA India’s Dec 2009 article:Closing your account? Beware of the banker’s revenge, Free4India’s: Close your old salary account or it will eat your money
For closing HDFC bank account you can see HDFC’s Closure Form(pdf format) , eHow.com’s How to Close an HDFC Bank Account, eHow.com’s How do I Close a Negative Bank Account?, Capital Advisor’s How to Close Your HDFC Bank Savings Account?, Jagoinvestors forum’s :Information on how to Close of HDFC Bank ISA Account
For other banks: Yahoo answer’s:I want to close my icici bank account in india? , Yahoo answer’s:How to close my axis bank account ?
- Changing Jobs and Tax, Form 12B
- Salary, Net Salary, Gross Salary, Cost to Company: What is the difference?
- Four Corner Stones:Income, Expense, Assets, Liabilities
- Advance Tax:Details-What, How, Why
Disclaimer: We have used HDFC bank account for representative purpose only we do not have any affiliation with it(other than having our own saving bank account there)
There was a time when people joined companies and worked there till retirement. Not any more. While changing jobs we often do not close our salary bank account or we get tax exemption from both the employers which is not allowed. Through this article we have tried to increase awareness about it.Hope it helped. Do you think it is important to close salary bank account? Did you fill form 12B? When you changed jobs how did you take care of these issues? What have been your experience in cloe bank account?
Hello thanks for explaining this wonderful information
If you want to know the procedure to Know Your Pan card status then read this blog.
I have changed my company and i want to use my old companies salary account only as my new companies salary account. Can anyone pls share the format of letter which needs to be submitted to bank to continue the same salary account with new company.
I think before closing any bank account one should ensure that is it attached to any mutual fund folio or are their any receivables in future in that account from any issue,ncds etc.
In case if anyone wish to delete bank account registered with MF folio then proof like cancelled copy of cheque needs to be provided.If you have earlier closed the account and you do not have any proof of owning the account then one need to submit the letter of said bank mentioning closure of the account.
Valid point Paresh. Shall update it!
I Think your table is wrong and you’ve put all the benefits of “Regular Salary Account” under “Regular Savings account”
Thanks a lot Ram. We had got the heading wrong. Corrected it now.
These factors you have described are very essential and very important to know.
Many a times peoples suffer due to less knowledge of these stuff. Our savings and investments are balanced by these facts only.
Thanks your comment is great encouragement to us. Just like common sense is not so common so is basic awareness of topics like these.