Breaking A Post Office FD Early? Here’s How It Affects Your Interest

Investing in fixed deposits (FDs) is a favorite choice for many Indians seeking safe returns. Among them, Post Office FDs are popular due to their reliability and decent interest rates. But what happens if you need to withdraw your FD before its maturity? Let’s break it down.

Rules for Breaking a Post Office FD

Post Office FDs come with a minimum lock-in period of six months. You cannot withdraw your money before this period.

• Withdrawal after six months but before one year: The interest rate drops to the savings account rate, which is 4%.
• Withdrawal after one year but before maturity: You get an interest rate 2% lower than the fixed rate.

So, breaking an FD early comes at the cost of reduced returns.

Special Rules for 5-Year Post Office FDs

5-year Post Office FDs have stricter rules:

• You cannot break them before four years.
• If withdrawn after four years but before maturity, the interest rate falls to the savings account rate.
• Premature withdrawal also nullifies any tax benefits you might have received on the FD.

Post Office FD Interest Rates

Here’s a quick look at the current FD rates offered by India Post:

1-year FD - 6.9%
2-year FD - 7%
3-year FD - 7.1%
5-year FD - 7.5%

These rates make Post Office FDs a secure option, but remember, early withdrawal reduces your earnings.

Post Office FDs are safe and reliable, but they reward patience. Premature withdrawals lead to lower returns and potential loss of tax benefits. Always check your tenure and withdrawal rules before investing.

Disclaimer: The information in this article is based on current Post Office FD rules and interest rates and is subject to change. Always check the latest rates and policies before investing.