Post Office FD Rules: How much loss will be incurred on breaking FD in post office, know the complete calculation
Post Office FD Rules: Like banks, the post office also offers fixed deposit (FD) options, allowing you to invest for 1, 2, 3, or 5 years. However, prematurely breaking an FD could result in a loss, as the post office charges a penalty.
News, Digital Desk- (Post Office FD Premature Closure) Post offices, like banks, offer fixed deposit (FD) options, allowing you to invest for 1, 2, 3, or 5 years. FDs have a fixed lock-in period, and you receive the full interest upon maturity.
However, if you prematurely break your FD, you may incur a loss, as the post office charges a penalty. Here's how much you'll lose if you prematurely break your Post Office FD.
Post Office FD premature closure rules-
Cannot withdraw money before 6 months
If you've deposited money into a Time Deposit (TD) account, you can't withdraw it before six months have passed. This means the money must remain in the account for six months.
1, 2 or 3 year TD account – Closing after 6 months but before 1 year-
If you close your 1, 2 or 3 year TD account after completion of 6 months but before completion of 1 year, you will get interest equal to that of Post Office Savings Account.
2 or 3 year TD account – If closed after 1 year-
If your account is for 2 or 3 years and you close it after 1 year, interest will be calculated at 2% less than the TD scheme interest rate (depending on the number of years completed).
If a part of the months is left (i.e., the full year has not been completed), the Post Office Savings Account interest rate will apply for that period.
5 year TD account – Cannot be broken for 4 years-
If your TD account is for 5 years, you can't close it for at least 4 years. If you close the account after 4 years, you'll only receive interest equal to that of a Post Office Savings Account.
This loss will occur in terms of tax-
Breaking a 5-year FD before maturity forfeits the tax claim under Section 80C. The amount is added to your current income and taxed according to your applicable tax slab.
Understand how with an example-
Suppose you invested in a tax-saving FD in 2024 and availed yourself of a tax exemption of ₹1.5 lakh on your annual income under Section 80C in 2024. However, in 2025, due to some exigency, you broke the FD.
The ₹1.5 lakh you saved in income tax in the previous financial year will be added to your income in 2025 (FY 2025-26). You will then be charged income tax based on your tax slab.