Can you convert your Savings Account into a Current Account?

6 MinsNov 23, 2021

Recently, Nivedita lost her job as a web designer when the firm she was working for shut down. But fortunately, she started getting freelance assignments from a client of her former company. As her freelance work increased, Nivedita realized that she would need to open a current account. One of the conditions of the client was that vendors like Nivedita should have a current account as they would not transfer funds to her savings account. 

can savings account


Nivedita already has a Savings Account with Axis Bank. She is wondering if she can convert the same into a Current Account. When she discussed it with her relationship manager, this is what she found out. 

Difference between Savings and Current Account  The two accounts are designed to cater to different needs. Savings Accounts are meant to encourage savings and the use of formal banking channels for personal income and expenditure. On the other hand, a Current Account is intended for business purposes. The Know Your Customer (KYC) requirements and documentation for opening a Savings Account are far more straightforward than those required for a Current Account.

As a result, as per the Reserve Bank of India regulations, you cannot convert a Savings Account into a Current Account and vice versa.

If Nivedita wishes, she can close her Savings Account, open a new Current Account and transfer all the funds from the former to the latter. However, her RM said that was not an advisable course.

Having both Savings and Current Accounts can help

The RM explained to Nivedita the advantages of continuing with her Savings Account and opening a Current Account for her business.

Benefits of Savings Account 

  • Savings Accounts are the ideal first step towards financial planning, savings and investments. They help an individual organise her finances.
  • They offer an interest rate on the money deposited in them, i.e. the balance amounts. The Axis Bank savings account interest rates start at around 3% ensuring your money is earning more money for you.
  • Savings Accounts can be used to build an Emergency Fund since the money is secure, earns a fixed interest and is easy to withdraw.
  • Since these accounts come with a debit card and net banking facilities, they can be easily used for online or offline transactions, as well as cash withdrawals.

Benefits of Current Account
Since a Current Account is designed for business purposes, they come with a separate set of benefits. For example: 

  • No restrictions on the number of transactions in a Current Account. As against this, if Nivedita were to exceed a certain number of transactions in a month in her Savings Account, her bank may charge her a fee
  • Current Account offers Overdraft Facility. This will help Nivedita tide over temporary cash flow issues in her business.

[Also Read: 8 Key Factors to Look at Before Opening a Current Account]

Easier to avail tax benefits with two accounts
Maintaining both her Savings and Current Accounts would ensure that Nivedita’s personal income and expenses and those for her business are kept separate. This will be of immense help when it comes to accounting.
As her business grows, Nivedita is likely to incur expenses – hiring employees or subcontracting part of the work, buying equipment, renting an office space and so on. All these can be paid for from her Current Account. Not only would this allow her to get an accurate picture of the business's financial health, but she will be able to write off these expenses against her business income, thereby saving taxes. If all these expenses were incurred from her Savings Account, the tax authorities might not allow such write-offs.

Axis Bank offers a range of current accounts designed to meet all its business customers' requirements – from sole proprietorship firms to large companies.

Similarly, Axis Banks offers an array of Savings Bank accounts, each of which comes with benefits tailored for its various categories of customers.

Disclaimer: The Source, a content creation and curation firm has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.