Current Account

Definition

If you're running a business in India and still routing transactions through a savings account, stop. A current account is what businesses use, designed for high-volume daily transactions with unlimited deposits and withdrawals, overdraft facilities, cheque issuance, and electronic fund transfers without the restrictions that savings accounts impose. The trade-off? No interest on your balance. Every scheduled commercial bank in India offers them, and you'll need one for GST registration, import-export operations, and basically any serious corporate banking relationship.

Under GST rules, your bank account must be linked to your GSTIN on the portal, and a current account is the standard choice. GST liability payments, TDS deposits, advance tax instalments, PF and ESI contributions, they all flow from here. Banks sweeten the deal with features like multi-location banking, bulk payment facilities for payroll runs, sweep-in arrangements that move idle funds to liquid investments overnight, and dedicated relationship managers for larger accounts. Minimum average balance requirements vary, from Rs 10,000 for basic accounts to Rs 1 lakh or more for premium business accounts.

The compliance angle matters more than people realise. Section 40A(3) of the Income Tax Act flat-out disallows business expense deductions for cash payments exceeding Rs 10,000 to a single person in a single day. That alone should push every payment through banking channels. But there's more: mixing personal and business transactions in the same account creates a nightmare for GST input tax credit claims and TDS reconciliation. And under the Prevention of Money Laundering Act, banks must report large cash transactions to the Financial Intelligence Unit. Keep it clean. Keep it separate.

Key Points

• Current accounts offer unlimited deposits and withdrawals with no interest: purpose-built for business transaction volumes.
• You need a current account linked to your GSTIN for GST compliance, and it's the standard channel for TDS, PF, and advance tax payments.
• Overdraft facilities provide instant short-term liquidity without a separate loan application.
• Section 40A(3) disallows expense deductions for cash payments over Rs 10,000/day/person: use banking channels.
• Never mix personal and business funds in one account. It complicates GST ITC claims, TDS reconciliation, and audit trails.
• Banks report large cash transactions to FIU-India under PMLA, 2002: this applies to all current account holders.