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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.
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
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.
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 |
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.
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
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.
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