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Posted on Jul 4, 2025
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When I first started freelancing, I used just one bank account for everything, including food orders, personal shopping, and client payments. Even though a single bank account was convenient, it became hard to track my earnings and expenses.
Many freelancers face the same issue. If you’re in a similar spot and are planning to open a different account, this guide will help you. I’ll explain all about current accounts vs. savings accounts for freelancers and help you choose the right one for your business.
How Do Savings Accounts Work for Freelancers?
First, let’s understand whether a savings account is right for you.
What is a savings account?
A savings account is meant for personal use, such as paying for groceries, food, subscriptions, and other essential expenses. Most of us start with a savings account. It’s the one your parents helped you open, or maybe the one that came with your college ID.
When you begin freelancing, it feels natural to keep using it. You can receive payments from clients in your savings account and pay for things either online or using a debit card.
What are the key features and benefits of savings accounts?
Easy to open: You can usually set it up online with just your PAN and Aadhaar, no need to show business proof.
Low minimum balance: You can maintain a minimum balance of ₹2,000 for a savings account in a lot of banks.
Interest earned on balance: You earn an interest of 3%-7% daily or quarterly on your account balance.
Quick transactions: You can link your savings account to UPI, Gpay, Paytm, and wallet apps to make online transactions easily.
What are the limitations of a savings account?
Even though a savings account offers several advantages, they are not suitable for business transactions. Here’s why:
Risk of account scrutiny: If large amounts are credited or debited from your savings account, your bank might question the account’s usage.
Transaction limits: UPI and NEFT transactions from savings accounts have a certain limit, making it difficult to transfer large amounts.
Difficulty in monitoring transactions: Managing both personal and professional transactions from one bank account makes it harder to calculate profits, track expenses, or prepare for tax filing.
Not seen as professional: Clients may hesitate when you share personal account details for payments.
No business tools or perks: Savings accounts do not offer features like overdrafts, invoice support, or bulk payments.
How Do Current Accounts Work for Freelancers?
Now, let’s learn about current accounts for freelancing.
What is a current account?
A current account is designed for business use. It’s built to handle higher transaction volumes and regular payments.
Current accounts don’t offer interest on account balance but provide more flexibility for tracking and managing your income.
What are the key features and benefits of a current account?
Here’s why you should consider using a savings account for freelancing:
No transaction limit: You can easily receive and transfer money whenever needed without worrying about limits.
Supports business tools: You can link it with invoicing platforms, accounting software, and payment gateways.
Looks more professional: Using a current bank account builds credibility, especially with large or international clients.
Cleaner financial tracking: It keeps your personal and freelance income separate, which helps during tax season.
Better for GST and compliance: If you’re registered under GST, a current account makes it easier to handle payments and file returns.
Can be opened as a sole proprietor: You don’t need a private limited company to get one. A sole proprietorship and basic documents are enough.
What are the limitations of a current account for freelancing?
Before you open a current account for freelancing, you should know its limitations, too:
No interest on balance: You don’t get any interest on your account balance.
Minimum balance requirements: Many banks ask you to maintain a monthly average balance of around ₹10,000.
Extra account charges: Some current accounts charge fees for things like cash handling, SMS alerts, or chequebooks, so it’s worth comparing options.
Current Account vs. Savings Account for Freelancers: Which Should You Choose?.
If you’re just getting started with your freelance business and earn up to ₹20,000–₹30,000 per month, open a savings account.
But if you have a high freelance income or work with international clients, a current account is more beneficial. Let’s understand this in detail.
When can you use a savings account as a freelancer?
Here’s when you should open a savings account for freelancing income:
Freelancing part-time: If you’re doing freelance work occasionally alongside a job or studies, you can easily manage with a savings account.
Monthly income is less: If you’re earning ₹20,000 to ₹30,000 a month and working with a few Indian clients, a savings account works well.
Haven’t registered your freelance work: If you don’t have a GST number or haven’t registered as a sole proprietor, a savings account keeps things simple until you scale.
Want fewer formalities: There’s less paperwork involved with a savings account. You can open one with just your basic ID and start receiving payments right away..
When should you use a current account as a freelancer?
Choosing a current bank account for freelancing depends on how much you're earning, how often you get paid, and who you’re working with.
Here’s when you should use a current account for freelance income:
Consistent income: If your freelance income is growing or coming in regularly every month, it’s a good idea to move that activity into a current account. It helps you stay organized and avoid account flags for “business use” on a savings account.
Working with international clients: Many international platforms and clients prefer or require business account details. A current account also helps when you need to track inward remittances or collect FIRC documents for compliance.
Registered for GST or planning to: If you’ve crossed the GST threshold (₹20,00,000 annually) or expect to, a current account makes it easier to manage payments, file returns, and respond to audits if needed.
You want to keep things clean for taxes: Mixing personal and business transactions can get messy during tax season. A current account helps you track income, expenses, and deductions more clearly.
Current account vs. savings account comparison
Feature | Savings Account | Current Account |
Purpose | Personal use | Business or professional use |
Who it’s for | New or part-time freelancers | Full-time freelancers, consultants, small business owners |
Interest on balance | Yes | No |
Monthly transaction limits | Limited (especially on UPI, NEFT, RTGS) | No limit |
Professional Credibility | Lower | Higher (especially for invoices and corporate clients) |
Professional Credibility | Lower | Higher (especially for invoices and corporate clients) |
Bank scrutiny | Possible if used for frequent business transactions | Unlikely |
Minimum balance requirement | Low or zero | Usually higher |
Documents needed | Basic KYC (Aadhaar, PAN, address proof) | KYC + Business proof (invoice, GST, Udyam, website, etc.) |
Ease of tax tracking | Difficult when personal and business are mixed | Easier with clean business-only statements |
Integration with tools | Limited | Supports invoicing, accounting, and payment tools |
Ideal when | You’re starting out or freelancing occasionally | You’re earning consistently or scaling your freelance work |
Current account vs. Savings Account if You Work With International Clients
If you’re working with clients outside India, you need better control over payments and need to follow GST compliance. In such cases, a current account is more suitable.
Why a current account works better for international payments
While savings accounts can technically receive foreign payments, they’re not designed for it. You might run into issues like:
Banks are asking for additional documentation for each transfer
Delays in receiving money due to purpose code mismatches
Difficulty getting a Foreign Inward Remittance Certificate (FIRC) if you need it for tax or export reporting
A current account gives you a cleaner, more compliant way to handle these payments, especially if you receive payments from international clients.
Things to keep in mind for international payments
Make sure your bank supports foreign inward remittances. Infinity offers free FIRC for each transaction.
Use the right purpose codes while receiving foreign currency to avoid account issues.
Keep copies of invoices and contracts in case your bank or CA asks for proof of income.
You can also open a multi-currency account if you work with international clients from different countries.
How Infinity enables faster and compliant international payments
If you are working with international clients and are confused about how to receive payments, try Infinity App. It is a cross-border payment platform that enables you to receive foreign payments within 24 hours.
Plus, you just need to pay a 0.5% flat transaction fee for all international payments.
Tax and GST Implications of Account Choice
Whether you use a savings or current account doesn’t directly change your tax slab or GST rate, but it affects how accurately you can report income, claim deductions, and stay compliant.
As a freelancer, you’re considered a sole proprietor, so all income from clients is treated as business income under the Income Tax Act. If your annual revenue crosses ₹20 lakh (₹10 lakh in some states), you must register for GST.
Here’s how your account choice impacts this:
Taxable income: All freelance income is taxed under “Profits and Gains of Business or Profession.” If your business and personal funds are mixed in one account, it becomes harder to calculate the exact taxable income.
GST returns: If registered, you’ll need to file monthly/quarterly GST returns and keep proper records of invoices and payments received. A current account helps you do this cleanly.
Expense tracking for deductions: Freelancers can deduct eligible expenses like software, laptops, internet bills, and subscriptions. Keeping them separate from personal expenses makes your deductions stronger and audit-proof.
Filing ITR-3 or ITR-4: Depending on whether you use the presumptive taxation scheme or not, you’ll need accurate profit/loss records—something that’s easier to maintain with a dedicated current account.
In short, while the law doesn’t force you to use a current account, it becomes almost necessary once your income grows or you’re under GST. It helps you stay compliant and gives your CA or accountant a much clearer picture of your finances.
Best Practices for Managing Your Freelance Bank Accounts
Separate personal and business finances
Even if you’re not switching to a current account yet, consider using a second savings account just for freelance income. It helps you stay organised from day one and builds a habit of treating freelancing like a business.
Track income and expenses properly
Use simple spreadsheets, or better yet, tools like Infinity to track what you earn, what you spend, and which clients have paid you. Keeping a clear record saves time and prevents surprises during tax season.
Keep digital backups of contracts, invoices, and statements
Storing everything in one place—your client agreements, payment screenshots, invoices, and bank statements—makes it easier to resolve disputes or prove income if needed.
Regularly review bank activity for any compliance issues
Scan through your account activity every few weeks. Make sure client payments are coming in as expected, and look out for any charges or alerts from your bank that may signal a compliance issue.
Conclusion
Choosing the right bank account may not seem urgent when you’re starting out, but it makes a big difference in the long run. A savings account is fine for beginners, especially if your income is small and freelancing is part-time. But once your work becomes regular, your clients grow, or you start dealing with GST and international payments, it’s time to consider a current account.
A current account helps you stay compliant, look more professional, and keep your finances clean. When paired with the right systems—like Infinity for international payments—you’re not just working smarter, you’re building a business that’s easy to sustain.
Frequently Asked Questions
1. Can freelancers use a savings account to receive payments?
Yes, freelancers can use a savings account to receive payments, especially in the early stages. However, frequent or high-value transactions may trigger scrutiny from your bank, as savings accounts are meant for personal use.
2. Can I open a current account without a registered business?
Yes. Many banks allow sole proprietors to open a current account with basic business proof like a GST certificate, Udyam registration, invoices, or even a portfolio website.
3. Do I need to pay GST as a freelancer?
You need to register for GST if your total annual revenue exceeds ₹20 lakh (₹10 lakh in some states). Even if you’re below the limit, some clients may require a GST invoice for their own compliance.
4. What happens if I use a savings account for business income?
Occasional use is generally fine. But if you frequently receive payments from clients or platforms, your bank may flag the account, pause certain transactions, or ask for clarification.
5. Which account is better for international payments, savings or current?
A current account is better for international payments. It offers smoother remittance processing, easier access to FIRC certificates, and less risk of delays or rejections from banks.
