In India, Fixed Deposits have been a popular investment option for many individuals who look forward to assured returns with low risk. FDs come with a fixed tenure and interest rate, and you can withdraw the full amount after maturity. However, there might be situations where you need to break your FD before its maturity date. In this blog, we will discuss the process of breaking an FD and the important things to consider before making this decision.
How to Break a Fixed Deposit?
Breaking an FD can be done either online or offline, depending on the bank’s facilities and your preference. Let’s explore both methods:
1. Online
- Step 1 – Log in to your Bank Account: Visit your bank’s website and log in to your Internet banking account.
- Step 2 – Access Fixed Deposit Section: Navigate to the FD section to view details of your existing fixed deposits.
- Step 3 – Initiate FD Break Request: Select the FD that you wish to break and initiate the “FD Break” request.
- Step 4 – Fill in Necessary Details: Provide the reason for breaking the FD and specify the account where the FD amount should be credited.
- Step 5 – Confirm and Submit: Review the details; if everything is accurate, confirm and submit the request.
- Step 6 – Wait for Processing: The bank will process your request, and the funds will be credited to your specified account once the FD is successfully broken.
2. Offline
- Step 1 – Visit the Bank Branch: Go to your nearest bank branch where you hold the FD.
- Step 2 – Collect the FD Break Form: Ask the bank staff for the “Fixed Deposit Breakage Form.”
- Step 3 – Fill in the Details: Provide your FD account number, the reason for breaking the FD, and the account number where you want the funds to be transferred.
- Step 4 – Submit the Form: Hand over the filled form to the bank staff and wait for verification.
- Step 5 – Collect the Amount: After verification, the FD amount will be credited to your specified account.
Things to Consider Before Breaking FD
Before breaking your Fixed Deposit, consider the following factors to make an informed decision:
1. Interest Rate Impact
Breaking an FD before its maturity may lead to a lower interest rate than what was initially offered. Check the current interest rate for premature withdrawals.
2. Penalties
Banks usually charge a penalty for breaking an FD prematurely. Understand the penalty charges and calculate the final amount you will receive after deductions.
3. Financial Emergency
Evaluate the urgency of the situation. If it’s a financial emergency, breaking the FD might be necessary, even with penalties.
4. Alternate Sources of Funds
Explore other sources of funds before breaking the FD. It may include personal savings, emergency funds, or borrowing from family or friends.
5. Future Goals
Consider your financial goals. If breaking the FD aligns differently with your future plans, explore other options.
6. Tax Implications
Understand the tax implications of breaking the FD and how it might affect your overall tax liability.
7. Partial Withdrawal
Some banks offer the option of partial withdrawal from an FD. Explore this option if you don’t need to break the entire FD amount.
Conclusion
Breaking a Fixed Deposit should be a well-thought-out decision, considering its implications on your finances. Before breaking an FD, weigh the benefits and drawbacks and always explore other possible alternatives. It’s essential to have a clear understanding of the process and associated charges to avoid any surprises.
FAQs
Yes, most banks offer the facility to break FDs online, irrespective of when and where they were opened. However, the banks do charge a small amount as a penalty.
No, banks generally offer a lower interest rate on prematurely withdrawn FDs.
No, banks generally offer a lower interest rate on prematurely withdrawn FDs.
Yes, you can break your FD without specifying a reason. However, the bank will still levy penalties.
Disclaimer
This article is solely for educational purposes. Stable Money doesn't take any responsibility for the information or claims made in the blog.
