A bank offers various types of accounts. Each of them has its merits and demerits. But the best-suited for a business is the current account. Due to its benefits, it has become the right hand of a business. In this article, you will know the entire process regarding the opening of a current account in a bank.
Before learning about the process, let’s understand the concept behind the current account.
What is a Current Account?
Individuals like you open a savings account because the principal motive is to save money and ensure its availability when needed. But a business is not like that. It has to do a lot of transactions. That is why a Current Account is preferred. It is so because it has advanced features to ensure the smooth functioning of the business.
Some of the features include more transactions and deposits, overdraft facilities, and many more. But it doesn’t mean that there are advantages only. There are some demerits as well. It includes no interest on deposits, extra charges, and a higher minimum balance. But its benefits outweigh its limitations.
How to Open a Current Account?
Initially, you should be eligible to open a current account. The eligibility criteria vary from bank to bank. But the process is liberal in the case of most banks. If you are an NRI, don’t worry. Even you can open it in banks, subject to the eligibility criteria.
Opening a current account is no rocket science. Due to the latest technological advancements, it has become possible to open current accounts online as well. You have to fulfil the following procedure:
- Firstly, you have to download the form from the bank’s website. You can also get it from any branch of the bank.
- Then, fill the form with the necessary details.
- Afterwards, Collect the documents required for KYC.
- Attach the necessary documents and submit the same to the bank.
- After verification, the bank will open the current bank account.
That’s it! Your work is complete.
Documents Required For Current Account
As the businessmen open it for a business, documents related to the business are needed. Following documents are required:
- Account Opening Form: The primary document required is the filled form.
- Proof of the existence of business: To prove the existence, you can submit the registration certificate issued by a competent authority like Registrar of Companies (ROC), Partnership Incorporation Certificate, Trade License, and so on.
- Proof of address of business: Even the utility bills like electricity bills, water bills, etc., are sufficient to prove the address of the business. If they are not available, you can submit the Licence Agreement as well.
- KYC of the proprietor: The owner has to complete the Know Your Customer (KYC) process. For that, you can submit identity proofs like Aadhar Card, PAN Card, and Driving License.
- Tax Registration Documents: A business has to register with the Income Tax Department as well. So, you have to submit the PAN card of the firm and the latest Income Tax Returns if filed.
- Licenses from Relevant Authorities: Besides these documents, you should submit the license obtained from relevant authorities.
Apart from these, a colored photograph and a cheque are required. After all, you can’t expect the bank to open it without maintaining the minimum balance, even at the time of opening one
Also, specific documents are required for different businesses. They are as follows:
- Individual or Sole-proprietorship
- GST Certificate by GST Authority.
- Partnership firms
- Partnership Deed
- ID Proof, address proof and a photo of the partners
- Address proof of business premises
- Certificate by GST Authority
- Any other license by the concerned authority.
- A Business Registration Certificate.
- Certificate of Incorporation.
- Address of Communication.
- List of all directors.
- Memorandum of Association and Articles of Association.
- Address proof of the trust. It includes a rent receipt, rent/lease agreement or property documents.
- Copy of resolution.
- Also, KYC documents of the person(s) authorized are required.
- Copy of Trust Deed.
- Income Tax Registration if the income is exempt from tax
- List of trustees.
- Society and Associations
- Copy of Memorandum of Association
- Document of Registration of Society
- Copy of Resolution passed for opening and operating the account.
- List of members of its Managing Committee
- KYC of all the persons authorized.
- Hindu Undivided Family (HUF)
- Latest color photo of the Karta/authorized signatories.
- ID proof and address proof of Karta.
Due to its various benefits, the current account has become a necessity among the business. Opening the account is a piece of cake. You have to submit an account opening form with the necessary documents. The documents vary from bank to bank. Generally, the above documents are required.
In the end, ensure that all the necessary documents are available before opening a current account. If you are a startup founder and looking for a current, check our blog best current account for a startup.
Frequently Asked Questions (FAQs)
- What is the limit of a Current Account?
The minimum balance depends from bank to bank. At least, you have to maintain an average monthly balance of Rs 10k. But the higher the minimum balance, the higher is the free deposit limit.
- Can we have two accounts?
Earlier, there was no regulation regarding the same. But RBI had issued a notification in August 2020. On that day, it announced new rules on opening a current account. The intention is to ensure that banks that give loans have an idea of the company’s cash flows.
- Is GST mandatory for opening a current account?
As mentioned above, PAN Card is mandatory to open an account. However, GST is not compulsory to open a current account.
- Is it taxable?
The bank offers no interest in a current account. So, there is no tax. After all, why would anyone pay tax even when the person didn’t earn a single penny?