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Savings Accounts vs Salary Accounts: What is the difference?

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People often get confused between salary accounts and savings accounts or consider them as the same. In reality, they differ from each other despite sharing certain features. Let’s first understand what they are?

Savings accounts

Purpose: Savings money

Employees or businesspeople and adults or minors, anyone can open a savings account. Savings accounts are intended is to encourage the account holder to save money. There are several types of savings account, from which you can choose the one that provides all the services you require. Banks offer various types of savings account that cater to different needs and following are few of the important types among them,

  • Basic savings account
  • High-interest savings account
  • Online savings account
  • Joint account

A savings account holder has to maintain a minimum balance as per the guidelines of the bank, or else they are charged with penalty or fees.

Salary Account

Purpose: Crediting monthly salary

Salary accounts are exclusively designed for salaried employees. Just like its name, a salary account is basically an account opened to credit your salary by your employer. Unlike a savings account, a salary account is a zero-balance account meaning no obligations to maintain a minimum balance.

What are the basic differences between a salary account and a savings account?

Interest rates:

Interest rates provided by the respective bank is another fundamental difference between a salary account and a savings account. The amount in a savings account is always entitled to the interest rate, which is not in case of a salary account.


Both savings account and salary account are interchangeable,

  • Savings account to salary account:

When you join any organisation having an account with the same bank as you, you can transfer your savings account into the salary account.

  • Salary account into a savings account:

Your salary does not get credited in your salary account after you resign from an organisation. In such cases, the bank converts your salary account into a savings account. Once an account becomes a savings account, the rule of minimum balance maintenance is applicable for them. If the account holder fails to do so, the bank charges them with a penalty. Therefore, people who frequently change their jobs need to close their salary accounts with previous organisations. Otherwise, they have to the penalty charges applicable for their newly converted savings accounts.

Opening an account

Only your employer can open a salary account for you in the bank. On the other hand, anyone can open a savings account.

Tax applicable

The tax applicable is same for both types of accounts. TDS is applicable for amount more than Rs. 10,000 present in both types of account.

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