Post Office FD Premature Withdrawal Penalty
A Post Office Fixed Deposit (FD) or Term Deposit (TD) comes with a sovereign guarantee by the Indian government. In a post office FD, you can invest your money for a tenure of up to 5 years.
However, in unforeseen circumstances when you require immediate funds, you can also choose to go for a premature withdrawal. However, the Department of Post levies a penalty if you decide to withdraw funds from your deposit before it matures.
Post Office Fixed Deposit Premature Withdrawal Penalty
The proportion of interest charged as a penalty depends on the duration for which the investment was intact. Here are the rules for closing the account or making Post Office Fixed Deposit premature withdrawal:
You are not allowed to withdraw any deposit before 6 months from the deposit date
If you close your account after 6 months but before 1 year, the interest rate of the post office savings account will apply
If you close a 2, 3, or 5-year account after 1 year but before the maturity, the interest will be calculated at 2% less than the TD rate for completed years
If you withdraw before completion of 1 year, PO savings account interest rates will apply
An Example to Understand the Premature Withdrawal Process
You can close your account prematurely at the designated post office. Before you opt for the premature closure of the account, it is crucial to understand the interest implications and penalties involved. For better clarity, consider an example.
Say you invest ₹1 Lakh for a tenure of 5 years. If you close the account after 6 months but before 1 year, the rate of the savings account will apply, which is 4% p.a., as of August 2024.
If you close an account with a 2, 3 or 5-year tenure, the interest will be calculated at 2% less than the TD rate. In these cases, the applicable interest rate will vary between 5% p.a. and 5.5% p.a.
Conditions for Premature Withdrawal of Post Office FD
Each tenure has specific rules regarding when you can withdraw your funds early. Knowing these conditions will help you make informed decisions about your investment. Here’s a summary of the conditions for premature withdrawal of Post Office Term Deposits for different tenures:
FD Tenure |
Conditions |
1, 2, 3, or 5-Year FD |
Early withdrawal is not permissible before 6 months |
2, 3, or 5-Year FD |
Interest penalty on early withdrawal |
Impact on Interest Earned
Here are the interest rates that will apply when you withdraw the funds at various time durations:
6 Months to 1 Year: 4% p.a.
2 Years: 5% p.a.
3 Years: 5.1% p.a.
5 Years: 5.5% p.a.
Process for Premature Withdrawal of Post Office FD
Withdrawing funds from your National Savings Time Deposit Account (TD) involves a straightforward process. Follow these simple steps to close your account at the post office:
Go to the post office where your TD account is held
Request the application form for premature withdrawal
Complete the application form with the necessary details
Hand over the filled application form and your passbook to the concerned post office staff
Ensure that you receive confirmation of the account closure and any applicable interest adjustments
Conclusion
Consider a few key factors before withdrawing from your Post Office Fixed Deposit. First, know the minimum tenure for withdrawal. Assess whether you need the funds now or can wait in order to maximise your interest earnings.
Remember that early closure means lower interest rates, which can reduce your earnings. Understand the penalty structure for your FD tenure. Being aware of these factors will help you make informed choices.
Frequently Asked Questions
Can we withdraw post office FD before maturity?
Yes, you can prematurely withdraw your FD in the post office. You can do so at the designated post office where you have the account.
How can I transfer the post office FD account from one branch to another?
To transfer your account or certificate, apply using the prescribed form NC-32, along with your passbook and KYC documents. You can submit the transfer application at either the transferring or transferee office. However, the respective Head Post Office will finish the process.
Is it possible to carry out a post office premature withdrawal process for FDs before 6 months?
No, you cannot close your deposit account before 6 months after opening the account.
What are the rules for breaking a Post Office FD?
To break a Post Office Fixed Deposit before maturity, adhere to specific conditions based on the FD tenure. Generally, you cannot make an early withdrawal before six months.
Can I avoid the post office time deposit premature withdrawal penalty?
You cannot completely avoid the penalty, but you may reduce the impact by allowing the FD to reach its minimum tenure. If you withdraw after the minimum period, you may only face a reduced interest rate instead of a penalty.
What happens if I break post office FD before maturity?
If you break a Post Office FD before maturity, you will incur penalties, typically involving a reduction in interest rates. This will result in lower returns than what you would have earned if you kept the deposit until maturity.
What are the penalties for premature withdrawal of a Post Office 5-Year Term Deposit (TD)?
If you close an account with a tenure of 5 years, the interest will be reduced or provided based on the post office savings account rate.
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