FD Premature Withdrawal Penalty Calculator
Calculate the penalty and reduced returns when withdrawing your Fixed Deposit before maturity. Plan your investments better by understanding the financial impact of early withdrawals.
Calculate Premature Withdrawal Impact
Key Features
- ✓ Calculate exact penalty for premature FD withdrawal
- ✓ Compare returns between full term and early withdrawal
- ✓ Visualize financial impact of breaking your FD
- ✓ Bank-specific penalty rules integration
- ✓ Accurate interest calculations based on holding period
Current FD Premature Withdrawal Penalties
| Bank | Penalty Rate | Minimum Period |
|---|---|---|
| SBI | 0.50% | 7 days |
| HDFC Bank | 1.00% | 15 days |
| ICICI Bank | 1.00% | 7 days |
| Axis Bank | 1.00% | 15 days |
| IDFC First Bank | 0.50% | 7 days |
Last updated: May 8, 2025
How FD Premature Withdrawal Penalty Calculator Works
Enter FD Details
Input your principal amount, original interest rate, and the full tenure for which you initially invested in the FD.
Specify Early Withdrawal Time
Enter the actual period for which you held the FD before premature withdrawal. This helps calculate the applicable interest rate.
Apply Bank’s Penalty Rate
Choose your bank or enter a custom penalty rate. The calculator applies this penalty to determine the revised interest rate.
View Comprehensive Results
See the total financial impact, including penalty amount, interest lost, and the actual amount you’ll receive after premature withdrawal.
Understanding FD Premature Withdrawal Penalties
What is FD Premature Withdrawal Penalty?
When you withdraw a fixed deposit before its maturity date, banks typically charge a penalty by reducing the applicable interest rate. This penalty is usually between 0.5% to 1% of the interest rate that would have been applicable for the period the deposit was held.
For example, if your FD’s original interest rate was 7% and the bank’s penalty is 1%, you would receive interest at 6% for the period the deposit was held.
How Banks Calculate Premature Withdrawal Interest
Banks follow these general steps when calculating interest for premature withdrawals:
- Determine applicable rate: The interest rate applicable for the period the deposit was actually held (not the original rate)
- Apply penalty deduction: Subtract the penalty percentage from the applicable rate
- Calculate interest: Compute the interest based on this reduced rate for the actual holding period
- Add to principal: The final amount paid is the principal plus the interest calculated at the reduced rate
Financial Impact of Early Withdrawal
Premature withdrawal results in two types of financial losses:
- Direct penalty: The reduction in interest rate resulting in lower returns
- Opportunity cost: The interest you would have earned had you continued the FD till maturity
Additionally, if you withdraw before 5 years, any tax benefits claimed under Section 80C may be reversed.
Ways to Minimize Premature Withdrawal Penalties
- Opt for banks with lower premature withdrawal penalties
- Consider FD laddering to improve liquidity without penalties
- Use loan against FD instead of breaking the deposit
- Look for special FD schemes with flexible withdrawal options
- Maintain emergency funds separately to avoid withdrawing from FDs
Frequently Asked Questions
Do all banks charge the same penalty for premature FD withdrawal?
+No, penalty rates vary between banks. Most banks charge between 0.5% to 1% penalty on the applicable interest rate. Some banks may have a tiered penalty structure based on the deposit amount or tenure. Certain special FD schemes might have higher penalties, while some banks offer penalty-free partial withdrawals under specific conditions. Always check your bank’s terms and conditions for the exact penalty structure.
Is the penalty calculated on the original interest rate or the rate applicable for the actual period?
+For most banks, the penalty is applied on the interest rate applicable for the actual period that the FD was held, not on the original contracted rate. For example, if you invested in a 5-year FD at 7.5% but withdrew after 2 years, the bank will first determine what rate was applicable for a 2-year FD at the time of investment (say 6.5%), and then apply the penalty on this rate.
Can I avoid premature withdrawal penalties under certain conditions?
+Yes, some banks waive penalties under certain circumstances:
- Medical emergencies (with proper documentation)
- In case of the depositor’s death
- For senior citizen FDs under specific conditions
- During certain promotional schemes
- For partial withdrawals (in some flexi FD schemes)
Check with your bank for any applicable exemptions to penalty charges.
What are the tax implications of premature FD withdrawal?
+The interest earned on the FD up to the date of premature withdrawal is still taxable as per your income tax slab. Additionally:
- TDS already deducted will be adjusted against your total tax liability
- If you claimed tax deduction under Section 80C for a tax-saver FD and withdraw before 5 years, the tax benefit will be reversed in the year of withdrawal
- Form 26AS will reflect the TDS deducted on the interest earned
Consult a tax professional to understand the complete tax implications based on your specific situation.
Is taking a loan against FD better than premature withdrawal?
+In most cases, yes. Taking a loan against your FD is often more financially prudent than premature withdrawal because:
- Your FD continues to earn interest at the contracted rate
- No premature withdrawal penalty is applied
- Loan interest rates are typically 1-2% higher than the FD rate, which is often less than the loss due to penalties
- Tax benefits claimed under Section 80C remain intact
- You can repay the loan in installments instead of losing the entire investment
However, this depends on your specific financial needs and the loan terms offered by your bank.