RD Withdrawal Before Maturity

Yes, most banks and financial institutions allow RD withdrawal before maturity. However, this is subject to specific rules, penalties, and reduced interest rates. 

Penalty & Interest Implications 

When you break an RD before maturity: 

1. Reduced Interest: Interest is paid at the rate applicable for the period the deposit was held, not the original agreed rate. 

1. Penalty Charges: Banks typically impose a penalty ranging from 1% to 2% on applicable interest. 

1. Minimum Lock-in Period: Some banks require a minimum lock-in of 3 to 6 months before you can withdraw. 

RD Premature Withdrawal Rules (Bank-wise Examples) 

(Rates and policies may vary; always confirm with your bank.) 

How to Withdraw RD Before Maturity 

• Online Method: 

• Log into your net banking or mobile banking app. 

• Go to ‘Deposits’ → Select the RD → Choose ‘Premature Closure’. 

• Follow the prompts and confirm. 

• Offline Method: 

• Visit your bank branch with your RD receipt and ID proof. 

• Fill out the RD closure form. 

• The amount (after penalty) will be credited to your account. 

Tax Implications on Premature Withdrawal 

1. TDS: If the interest earned exceeds ₹40,000 (₹50,000 for senior citizens) in a financial year, TDS at 10% is applicable. 

1. Reduced Interest Means Lower Taxable Income: Since interest is reduced on premature closure, your taxable income from RD also decreases. 

Should You Break Your RD Before Maturity? 

Consider breaking your RD only if: 

1. You're in urgent need of funds. 

1. The RD is earning lower returns than market rates. 

1. You’re switching to a more flexible or high-yield investment. 

Otherwise, it’s best to let your RD mature to avoid loss of interest and penalties. 

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