Bank of India FD premature withdrawal

Features of Bank of India FD Premature Withdrawal

Bank of India (BOI) FD premature withdrawal affects the applicable FD interest rates. The features of Bank of India FD premature withdrawal are: 

How to Close Bank of India FD prematurely? 

To close your Bank of India FD prematurely, follow these simple steps: 

Step1: Visit your Bank of India branch where you hold the FD.

Step 2: Carry your Term Deposit Receipt (TDR) and a valid ID proof.

Step 3: Request a “premature closure” of your FD and fill out the required form.

Step 4: Submit the form to the bank official.

Step 5: Once processed, the recalculated FD amount (after interest adjustment and any penalty) will be credited to your linked savings account.

Disadvantages of Bank of India FD Premature Withdrawal

The disadvantages of Bank of India FD premature withdrawal are: 

• Reduced returns: Because BOI recalculates the interest for the actual time your deposit stayed in the bank (or uses the contracted rate, whichever is lower) and then applies a penalty, your effective return will likely be lower than the original expectation.
• Possibility of no interest: If the FD is broken within 7 days, you will not receive any interest.
• Penalty Applies in Most Situations:  Except for special cases such as renewal for a longer tenure, death of depositor(s), or staff-related accounts, premature closure of most regular deposits attracts a penalty. This reduces the final payout.
• Complex Conditions for Penalty Waivers: The bank provides multiple exceptions—like no penalty on renewal for a longer tenure, death of depositor(s), and staff-related categories. Because these conditions vary, customers may find it difficult to clearly understand when a penalty applies and when it does not.

Tax Implications on Bank of India FD Premature Withdrawal

If you withdraw your Bank of India Fixed Deposit before maturity, the interest is recalculated at a lower rate based on the actual tenure the funds remained in the account. This revised interest is fully taxable and classified under “Income from Other Sources” as per your income tax slab. As per Section 194A of the Income Tax Act, Bank of India deducts TDS at 10% if the total interest earned in a financial year exceeds ₹50,000 for regular customers or ₹1,00,000 for senior citizens. If your PAN is not linked to the bank account, TDS is deducted at a higher rate of 20%.

How to Avoid Bank of India FD Premature Withdrawal?

The ways to avoid Bank of India FD premature withdrawal are:

• Maintain an emergency fund: Keep sufficient liquid cash in a savings account (or a sweep-in facility) so you don’t need to break your FD in a hurry.
• Choose FD tenures wisely: Pick a duration that aligns with your financial goals and cash flow needs, minimizing the chance of early closure.
• Plan FD Tenure Carefully: BOI recalculates interest on premature withdrawal based on the actual tenure your deposit was held. Choosing a tenure that matches your financial goals helps avoid reduced returns due to early closure.
• Maintain a Linked Savings Account: Since the recalculated FD amount (after interest adjustment and penalty, if any) is credited to your linked savings account, keeping it active ensures smooth and timely receipt of funds.

Key Takeaways

Bank of India FD premature withdrawal results in interest being recalculated for the actual tenure and may attract a penalty in most cases. Understanding BOI FD interest rates and planning your FD tenure carefully can help you maximize returns and avoid early withdrawal losses.