Post Office FD Premature Withdrawal Penalty
India Posts offers a secure investment option which is known as Post Office Fixed Deposit (FD) . In this type of Fixed Deposit, you can invest your money for up to 5 years.
It provides guaranteed returns over a fixed tenure. However, if an investor decides to withdraw the deposit before its maturity, then it is known as a premature withdrawal. Premature withdrawals come with a penalty, which reduces the interest earned on the deposit. Therefore, it is very important to understand this concept for planning any investments and avoiding unexpected losses.
Penalty Rules for Premature Withdrawal of Post Office Fixed Deposit
Given below are the penalties that will be applied if you withdraw your Post Office Fixed Deposit before the maturity period:
- No withdrawals within the first 6 months: You cannot withdraw your deposit before completing 6 months from the date of investment.
- Withdrawal before 1 year: If you close your FD account after six months but before one year, then the interest earned will be calculated at the Post Office Savings Account rate, which is less than the FD rate.
- Withdrawal after 1 year but before maturity (for 2, 3, or 5-year FDs): If you close your FD after completing 1 year but before the full tenure, then you will earn 2% less interest than the fixed deposit rate for the number of completed years
- Withdrawal before completing 1 year (general rule): In general, if the FD is withdrawn before 1 year, the interest applied will be that of a Post Office Savings Account, which is lower than the FD rate.
Effect on Post Office FD Interest on Early Withdrawal
In case you close your FD early, then the interest you get totally depends on how long you kept the deposit. These are as follows:
Duration of FD Before Withdrawal | Interest Rate (per year) |
After 6 months but before 1 year | 4% |
After 2 years | 5% |
After 3 years | 5.1% |
After 5 years | 5.5% |
Steps to Withdraw a Post Office FD Before Maturity
If you want to take out your Post Office FD before it completes its full term, then you need to follow the steps given below:
- Go to the Post Office branch where your FD is held.
- Fill in the FD premature withdrawal form correctly.
- Submit the original FD certificate as proof of your deposit.
- Provide valid ID proof such as Aadhaar card, PAN card, Voter ID, or Passport.
- Submit the filled form and documents for verification.
- Once approved, the Post Office will credit the money to your account.
FAQs on Post Office FD Premature Withdrawal Penalty
- Will I lose any interest if I break the FD early?
No, you will not lose all the interest earned, but you will earn interest at a lower rate based on the completed tenure, which is usually lower than the original FD rate.
- What interest rate will I get if I make a premature withdrawal?
The interest rate depends on the completed tenure, like you will get 4% per annum for 6 months to 1 year, 5% per annum for 2 years, 5.1% per annum for 3 years, and 5.5% per annum for 5 years.
- What is Post Office FD Premature Withdrawal?
It means taking out your fixed deposit money before the end of its fixed period. You usually get less interest than the maturity period interest rate.
- Is TDS (Tax Deducted at Source) deducted on Post Office FD interest?
Yes. TDS is deducted if your total interest in a year is more than Rs.50,000 for the general public or Rs.1,00,000 for senior citizens.
- Can I withdraw my Post Office FD before 6 months?
No, you cannot withdraw your Post Office FD before 6 months from the deposit date.
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