Fixed Deposits Withdrawal: Process, Ways, Premature Charges, and Tax

Fixed Deposits (FDs) are one of the safest and most popular investment options in India. However, situations often arise when you need to withdraw your FD either on maturity or before the tenure ends. Understanding the FD withdrawal process, available methods, penalties, and tax implications helps you make the right decision without losing unnecessary interest.

This blog explains everything you need to know about FD withdrawal.

Fixed Deposits

What Is Fixed Deposits Withdrawal?

FD withdrawal refers to closing or partially closing your fixed deposit and receiving the deposited amount along with applicable interest. You can withdraw an FD:

On maturity
Before maturity (premature withdrawal)
Partially (in some banks)

The rules and charges depend on the bank, FD type, and tenure completed.

Types of Fixed Deposits Withdrawal

1. FD Withdrawal on Maturity

This is the simplest form of withdrawal.

The FD completes its full tenure
You receive the principal + full interest
Many banks auto-credit the maturity amount to your linked savings account

If auto-renewal is enabled, you must manually close the FD before maturity to avoid renewal.

2. Premature Fixed Deposits Withdrawal

Premature withdrawal means closing the FD before its maturity date.

Allowed by most banks
Usually attracts a penalty
Interest is recalculated at a lower rate

This option is used during emergencies or when better investment opportunities arise.

3. Partial Fixed Deposits Withdrawal

Some banks allow partial withdrawal instead of full closure.

Only a portion of the FD is withdrawn
Remaining amount continues to earn interest
Not available for all FD types

FD Withdrawal Process (Step-by-Step)

1. Online Fixed Deposits Withdrawal Process

Most banks now offer a fully digital withdrawal process:

Log in to your bank’s net banking or mobile app
Go to Fixed Deposit / Term Deposit section
Select the FD you want to withdraw
Choose premature or full withdrawal
Confirm the request

Time taken: Amount is usually credited within a few minutes to 1 working day.

2. Offline Fixed Deposits Withdrawal Process

If you prefer visiting the branch:

Visit your bank branch
Submit a written FD closure request
Provide FD receipt (if issued physically)
Complete KYC verification
Amount is credited to your bank account

This method may take 1–3 working days.

Ways to Withdraw Fixed Deposit

There are multiple ways to withdraw a fixed deposit, depending on your bank and convenience. Most banks today offer both online and offline options.

1. Online Banking

With net banking, FD withdrawal is quick and paperless.

Log in to your bank’s net banking portal
Go to the Fixed Deposit or Term Deposit section
Select the FD you want to close
Choose full or premature withdrawal
Confirm the request

The withdrawal amount is usually credited to your linked savings account within a few hours or by the next working day.

2. Mobile Banking App

Most banks provide FD withdrawal through their mobile apps.

Open your bank’s mobile app
Navigate to deposits or investments
Select the FD and place a withdrawal request

This is one of the fastest and most convenient methods, especially during emergencies.

3. Branch Visit

If you are not comfortable with digital banking, you can withdraw your FD by visiting the bank branch.

Submit a written FD withdrawal request
Provide FD receipt (if issued)
Complete KYC verification

The amount is generally credited within 1–3 working days.

4. Auto-Credit on Maturity

On FD maturity, banks usually auto-credit the maturity amount to your linked savings account.

No manual request required
Applicable if auto-renewal is disabled

If auto-renewal is enabled, you must close the FD manually before maturity to avoid renewal.

FD Withdrawal Charges & Penalty

Withdrawing a fixed deposit before maturity can reduce your returns. Banks apply penalties and recalculate interest based on specific rules.

1. Premature Withdrawal Penalty

When an FD is closed before maturity:

Banks charge a penalty for early withdrawal
Penalty is deducted from the interest amount
Principal amount remains unaffected

The exact penalty varies by bank and FD type.

2. Interest Rate Reduction

In case of premature withdrawal:

Interest is recalculated for the actual tenure completed
The revised interest rate is lower than the original rate
Penalty is applied on top of the reduced rate

This results in lower total returns compared to holding the FD till maturity.

3. Bank-Wise Penalty Range (0.5%–1%)

Most Indian banks follow a similar penalty structure:

Public and private banks: 0.5%–1%
Senior citizen FDs: Slightly relaxed in some banks
No-penalty FDs: No deduction, but lower base interest

Always check your bank’s FD terms before withdrawing early.

Tax Impact on Fixed Deposits Withdrawal

TDS on Fixed Deposits Interest

TDS is deducted if annual FD interest exceeds ₹40,000
For senior citizens, the limit is ₹50,000

Taxation Rules

FD interest is fully taxable as per your income slab
Premature withdrawal does not avoid tax liability

Form 15G / 15H

You can submit:

Form 15G (non-senior citizens)
Form 15H (senior citizens)
to avoid TDS if your total income is below the taxable limit.

NOTE:- Fillable Form 15G/ 15H

Fixed Deposits Withdrawal Rules You Must Know

Some FDs have a minimum lock-in period
Tax-saving FDs (5-year) do not allow premature withdrawal
Sweep-in FDs allow flexible withdrawals without full closure
Joint FDs may require consent of all holders (depends on mandate)

Fixed Deposits Withdrawal vs Loan Against FD

If you need money urgently, consider this comparison:

1. Premature Fixed Deposits Withdrawal

Interest loss due to penalty
FD account closes
Breaks long-term savings

2. Loan Against Fixed Deposits

Lower interest rate than personal loans
FD continues earning interest
No penalty or tax impact

Tip: Loan against FD is usually a better option for short-term needs.

Factors to Consider Before Withdrawing an Fixed Deposits

Penalty and interest loss
Tax implications
Emergency vs planned expense
Availability of alternative funds
Impact on financial goals

Withdraw your FD only when necessary.

Common Problems During Fixed Deposits Withdrawal

1. Delay in Credit of FD Amount

Sometimes, the withdrawn FD amount may not get credited immediately.

Technical issues in net banking
Bank holidays or non-working days
Additional verification for high-value FDs

If the delay exceeds the expected timeline, contact bank customer support.

2. FD Receipt Lost or Misplaced

For older or offline FDs, a physical FD receipt may be required.

Banks may ask for an indemnity bond
Identity and signature verification is mandatory
Processing time may increase

3. KYC or Name Mismatch Issues

FD withdrawal can get delayed if:

KYC is incomplete or outdated
Name differs from bank records
PAN or Aadhaar details do not match

Updating KYC details usually resolves this issue quickly.

4. Joint FD Withdrawal Issues

In joint FDs, withdrawal depends on the operation mode.

Jointly operated: Consent of all holders required
Either or Survivor: One holder can withdraw

Lack of required consent may block the withdrawal request.

5. Auto-Renewal Not Stopped on Time

If auto-renewal is enabled:

FD gets renewed automatically on maturity
Withdrawal requires premature closure of renewed FD
Penalty may apply after renewal

Always check auto-renewal settings before maturity.

6. Restrictions on Specific FD Types

Certain FDs have strict withdrawal rules.

Tax-saving FDs do not allow premature withdrawal
Corporate or special FDs may have lock-in periods

Always review FD terms and conditions before investing.

7. Technical Errors in Online Withdrawal

Online FD withdrawal may fail due to:

App or server downtime
Session timeout
Incorrect selection of FD or account

Retry after some time or use an alternate method like branch visit.

FAQs on Fixed Deposits Withdrawal

1. Can I withdraw my fixed deposit before maturity?

Ans: Yes, most banks allow premature FD withdrawal, except for tax-saving FDs. However, early withdrawal usually attracts a penalty and lower interest payout.

2. How long does FD withdrawal take?

Online withdrawal: Instant to 1 working day
Offline (branch) withdrawal: 1–3 working days

The amount is credited directly to your linked bank account.

3. Is there any penalty for FD withdrawal?

Ans: Yes, banks usually charge a penalty of 0.5% to 1% on the applicable interest rate if you withdraw the FD before maturity.

4. Can I withdraw FD partially?

Ans: Partial FD withdrawal is allowed only in some banks and for specific FD types. If permitted, the remaining balance continues to earn interest.

5. Can FD be withdrawn online?

Ans: Yes, most banks allow FD withdrawal through net banking or mobile banking apps, making the process quick and paperless.

6. Is FD withdrawal possible without penalty?

Ans: Penalty-free withdrawal is possible only:

On FD maturity
In no-penalty FD schemes
For certain senior citizen or special FDs (bank-specific)

7. Does FD withdrawal affect my credit score?

Ans: No, FD withdrawal does not affect your credit score because it is not a loan or credit product.

8. Is TDS deducted on FD withdrawal?

Ans: TDS is deducted on FD interest, not on the principal amount, if interest exceeds:

₹40,000 per year (regular citizens)
₹50,000 per year (senior citizens)

9. Can I avoid TDS on FD interest?

Ans: Yes, by submitting:

Form 15G (non-senior citizens)
Form 15H (senior citizens)
if your total income is below the taxable limit.

10. Can a joint FD be withdrawn by one holder?

Ans: It depends on the operation mode:

Either or Survivor: One holder can withdraw
Jointly: Consent of all holders is required

11. What happens if I forget to withdraw FD on maturity?

Ans: If auto-renewal is enabled, the FD gets renewed automatically. Otherwise, the maturity amount is credited to your linked account or earns savings account interest.

12. Can I withdraw a tax-saving FD before 5 years?

Ans: No, 5-year tax-saving FDs do not allow premature withdrawal under any circumstances.

13. Is loan against FD better than FD withdrawal?

Ans: Yes, in most cases. A loan against FD avoids penalty, keeps your FD active, and usually costs less than losing FD interest.

Conclusion

FD withdrawal is a simple process, but withdrawing before maturity can lead to penalties and tax impact. Always compare premature withdrawal with alternatives like loan against FD before making a decision.

Understanding the process, charges, and rules helps you protect your savings and make informed financial choices. Withdraw your FD only when unavoidable—and always check your bank’s specific rules before proceeding.