Post Office FD: How much will you lose if you break your Post Office FD prematurely? Find out..

Post Office FD Premature Closure: Like banks, post offices also offer FD options. You can invest in fixed deposits for 1, 2, 3, and 5 years. However, FDs have a fixed lock-in period. You receive the full interest only upon maturity. However, if you need money prematurely and have to break your FD, you suffer a loss because the post office charges a penalty. Here's how much you'll lose if you break your Post Office FD prematurely.

Post Office FD Premature Closure Rules

If you've deposited money in a Time Deposit (TD) account, you can't withdraw it before six months have passed. This means you must keep the money in the account for six months.

If you close a 1, 2, or 3-year TD account after 6 months but before 1 year, you will receive interest equal to that of a Post Office Savings Account.

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 portion of the months remains (i.e., the full year has not yet been completed), the Post Office Savings Account interest rate will apply for that period.

If your TD account is for 5 years, you cannot close it for at least 4 years. If you close the account after 4 years, you will only receive interest equal to that of a Post Office Savings Account.

These are the tax disadvantages:
If you break a 5-year FD before maturity, your tax claim under Section 80C will be rejected. In such a case, that amount will be added to your current income, and income tax will be charged to you based on your tax slab.

Let's understand how with an example:
Suppose you invested in a tax-saving FD in 2024 and availed a tax exemption of ₹1.5 lakh on your annual income under Section 80C. 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 for 2025 (FY 2025-26). You will then be charged income tax based on your tax slab.

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