Citibank FD Premature Withdrawal

What is Citibank FD Premature Withdrawal?

Citibank FD Premature Withdrawal means closing your fixed deposit before its maturity date. While this facility provides financial flexibility during emergencies such as medical expenses or sudden financial needs, it reduces your expected returns. On top of this, a Citibank FD Premature Withdrawal Penalty is applied, reducing the effective interest earned. Citibank FD interest rates and penalties are low comparatively, so the final payout investors receive is notably less than what they would have earned by holding the FD until maturity.

How to Close a Citibank FD Prematurely?

Citibank provides both online and offline modes for FD closure, catering to customers comfortable with digital banking as well as those preferring in-branch services.

Online Closure Process

Starting an online FD closure through Citibank is quick and simple. Here’s how the process runs:

• Sign in with your Citi user ID and password.
• Select the FD account to close from the deposits menu.
• Click on the closure request or premature termination tab.
• Review the revised interest rate and withdrawal charges.
• Verify details and submit the request.
• After processing, the final amount is credited to your linked savings account.

Offline Closure Process

If customers wish to manage banking requirements personally, Citibank allows them to close an FD through any branch:

• Visit your nearest Citibank branch and request the premature FD closure form.
• Ask staff for assistance with the process and form.
• Provide your name, FD account number, deposit amount, and linked savings account details.
• Attach valid ID proof (Aadhaar, PAN, passport, etc.) if requested.
• The bank verifies details, recalculates interest, and applies penalties.
• The adjusted amount is credited to your linked savings account, typically within one working day.

Disadvantages of Citibank FD Premature Withdrawal

Before opting for Citibank FD Premature Withdrawal, customers should evaluate the consequences:

• Citibank FD Premature Withdrawal Penalty: Citibank places a penalty on premature withdrawals, lowering returns and discouraging early closure without providing a valid reason.
• Loss of Expected Interest Earnings: Premature closure leads to interest being applied at a lower rate, cutting down returns from the agreed FD interest rates.
• Disruption of Financial Goals: This disrupts financial goals such as education, retirement, or property purchases, often requiring costlier funding options.
• Impact on Linked Banking Services: Investors who withdraw a large FD could experience changes in their relationship with the bank, which may affect eligibility for preferential services.
• Time-Consuming Process (If Offline): When customers close fixed deposits offline, submitting forms and undergoing verification may result in delayed access to their money.

How to Minimise TDS on Citibank FD Premature Withdrawal?

Tax rules remain unchanged even if an FD is withdrawn before maturity. Interest earned on deposits is liable to tax under “Income from Other Sources” according to the depositor’s tax slab. If the total interest earned from fixed deposits in a financial year crosses ₹50,000 for regular depositors or ₹1,00,000 for senior depositors, Citibank may deduct TDS. To avoid excess TDS, eligible investors should submit Form 15G or 15H at the start of the financial year. However, regardless of premature closure, the earned interest must be reported while filing your Income Tax Return (ITR). This ensures compliance and prevents tax notice discrepancies.

How to Avoid Citibank FD Premature Withdrawal?

To prevent unnecessary reduction in returns, consider these alternatives:

• Plan Your Tenure Carefully: Customers should assess their anticipated expenses and savings timeframe before making an FD. Choose a tenure that suits your liquidity requirements to prevent early closure of the deposit.
• Split Deposits into Multiple FDs: Depositors may consider splitting a large sum into several smaller FDs rather than one large deposit. If an urgent expense arises, only one FD may be closed, avoiding all fines on the remaining deposits.
• Consider Credit Card Against FD: Citibank credit card against FD allows customers to access credit conveniently without closing their deposit. This helps the deposit keep earning interest while providing funds for urgent financial needs.
• Maintain an Emergency Fund: Ensure that a portion of savings remains in liquid forms, like savings accounts or recurring deposits, so depositors can meet unforeseen costs without prematurely withdrawing funds.
• Explore Overdraft or Loan Against FD: Rather than closing an FD, consider borrowing against it at a lower interest rate. This approach enables customers to retain their principal and avoid the Citibank FD Premature Withdrawal Penalty, so that interest on the FD continues to accumulate.

Key Takeaways

Citibank allows depositors to close fixed deposits before the maturity date, but this attracts a 1% reduction in the interest earned. The original rate is cancelled, and interest is recalculated in line with the actual tenure, causing lower returns. Premature withdrawal can disrupt financial goals and may require submitting KYC documents for offline closure. Tax on earned interest remains, and TDS may be deducted. To reduce penalties and maintain returns, customers may plan FD tenures carefully, split deposits, keep an emergency fund, or make use of loans against FD.