Skip to main content

Decoding Bank Statements

The mailbox of account holders at the end of each month or quarter, bank account statements hardly ever get a second look. Unless, of course, it is time to submit them to the chartered accountant for the annual income tax computation.

Most, unfortunately, give the document a cursory glance. And that, too, to check the balance. The fact is that it contains many more details.

Transactions like deposits, withdrawals, debit card purchases, cheques written and other monthly deductions from the account for paying other businesses — along with bank charges or fees — are included in the statement.

A bank account statement reveals the small charges that you pay as a customer for different transactions. Sometimes, they may add up to a substantial sum.

The account summary gives the basics — opening balance, amount credited, amount debited and closing balance. But that's not all.

Start with the basics (the top of the account statement): Customer ID and account number: These are unique numbers that belong to you. A single ID is assigned to you even if you hold more than one account with the bank. However, each account will have a different account number.

Account type: Whether it is a savings or a current account.

Account status: Actively-operated accounts are marked 'Regular'. No transaction for six months makes them dormant. To re-activate or make a transaction, the branch has to be contacted.

Overdraft facility: Based on the type of the account (current) or as against a fixed deposit, the overdraft amount is mentioned.

Nomination: The beneficiaries of your account, especially if held by a single person, are mentioned at the start of the statement. It is important to have a beneficiary as it is difficult to make claims in case of a mishap or the account holder's death.

Reading the details Look at the particulars or the narration part. This gives details of transactions, along with dates, withdrawals, deposits and the closing balance. If transactions are through cheques, cheque numbers are also given.

While describing a particular transaction, the nomenclature can be different for each bank. Some banks are more customer-friendly and explain abbreviations at the end. Others test your knowledge of cryptology ( see table ).

'CHQ DEP-MICR CLGCLEARI' is one way to describe a cheque deposited in your account. Some might even give details of the cheque issuer and the bank. For instance, the narration would read as, 'XYZ INDIA 55555 HDFC'. And your chartered accountant will be quite thankful for these details. In cases they do not give these details, you may have to keep a record to avoid confusion at the end of the year.

There are two more columns: The Auto sweep and the Reverse sweep. The Auto sweep facility allows a bank to convert funds from your account into a fixed deposit (FD). However, if there are insufficient funds for a cheque payment, the Reverse Auto sweep is initiated. Funds from FD are transferred to the account to make the payment. The interest on FD is calculated depending on the tenure chosen by you and how much and how soon (prematurely) the funds are withdrawn.

Reading them can be quite confusing. Here's some help...

accounts, banks could use the terms IB (internet banking) fund transfer and INF (internet fund transfer). NEFT (National Electronic Funds Transfer) to transfer between two banks and TPT in case of a third party transfer

RTGS (Real Time Gross Settlement): An electronic facility used for transacting cash over Rs 1 lakh

INW CLG: Indicates inward clearing done by the bank (when we issue a cheque)

EBA: For trading-related transactions by some banks

BIL: Bill payments through the internet

FI, SP: Bounced cheques due to insufficient funds. SP stands for stop payment

TIPS: Tips made at a restaurant, when paying through the credit card of the same bank, are deducted separately

INT: Your cash in the account (daily from April 1) earns interest

ATW (NWB/ATS or VAT/MAT/NFS): ATM withdrawals. When withdrawals occur at another bank's ATM, a few more abbreviations are added ( as shown in the bracket )

Popular posts from this blog

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...

Mutual Funds: Past Performance is not just everything

Many a times your agent / distributor / relationship manager tries to push you some mutual fund schemes by enticing you with a typical sales pitch…"Sir, this scheme has generated 20% returns in the past one year." And this sales pitch often gets louder when the market conditions have been favourable. Some of the agents / distributors / relationship managers have another unique way of luring you. They say, "Sir / madam this scheme has been awarded the best scheme award in the past by a leading business channel"... And hearing all these sales talks you investors very often get attracted and sign a cheque in favour of the respective scheme.   But please ask yourself do you hear these sales talks when the capital markets turn turbulent? Why is it so that your agent / distributor / relationship manager avoids talking to you during turbulent times of the capital markets and doesn't boast about returns generated by the respective funds or awards being conferred on t...

What are Tax savings Bank Fixed Deposits?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   These are a special type of bank fixed deposits, of five-year tenure, which allow you to have tax benefits for investments of up to Rs 1 lakh per person per financial year. Investments in these FDs give tax benefits under 80C of the Income Tax act. These are not very liquid investments because the money is locked-in for five years. One also has the option to continue the FD for another five years after the lock-in ends. Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax ...

Good time to invest in Infrastructure Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Good time to invest in infrastructure The Sensex has gained almost 10 per cent from May 15 till date, while the CNX Infrastructure Index has gained almost 17 per cent in the period. The price to earnings ( P/ E) ratio of the BSE Sensex is 18.96; for the CNX Infrastructure Index, it is 24.57. The estimated P/ E for next year is 14.04 for the Sensex. Of the 24 companies that make up the CNX Infrastructure Index, six have a P/ E higher than 20. Does this mean infrastructure is fairly valued? Or, has it run up quite a bit? According to experts, barring stray companies, the infra sector is fairly valued and it is a good time to invest. Even if some companies are facing debt restructuring problems, once interest rates come down and regulatory norms become flexible, they will start giving good re...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now