IndusInd Bank FD Premature Withdrawal

What is IndusInd Bank FD Premature Withdrawal?

IndusInd Bank FD premature withdrawal refers to closing a fixed deposit before its agreed maturity period. The bank allows such withdrawals in accordance with its premature withdrawal policy. In these cases, the final interest is not paid at the original agreed rate but is recalculated based on the actual tenure for which the deposit was held. A penalty on the applicable interest rate may also be deducted. To clearly understand the revised payout at premature closure, it is important to refer to the current IndusInd Bank FD rates and penalty guidelines.

How to Close an IndusInd Bank FD Prematurely?

You can complete the IndusInd Bank FD premature withdrawal process offline or online.

1. Online Method

   • Log in to the IndusInd NetBanking portal using your NetBanking User ID and password.
   • Navigate to the ‘Fixed Deposits’ or ‘Deposit Services’ section.
   • From the drop-down list, select the Fixed Deposit account number you wish to close.
   • Click on ‘Close FD’ or ‘Premature Withdrawal’.
   • Click ‘Continue’, and then ‘Confirm’ to complete the process.
   • After deducting applicable penalties, the funds will be credited to your linked IndusInd Bank savings account.

2. Offline Method

   • Visit the nearest IndusInd Bank branch where your fixed deposit was originally opened.
   • Request the fixed deposit premature closure form from the bank staff.
   • Fill in the form with accurate details such as the FD account number, withdrawal amount, and the account where the funds should be credited.
   • Submit the completed form along with the original FD receipt and valid identity proof like a PAN card or Aadhaar card.
   • The bank official will verify your documents and process the request.
   • Once approved, the fixed deposit amount, after interest adjustment and applicable premature withdrawal penalty, will be credited to your linked savings account.
   • Ensure that your KYC details are up to date to avoid any delay in processing.

Disadvantages of IndusInd Bank FD Premature Withdrawal

If you close an IndusInd Bank FD before maturity, it can provide quick liquidity to meet emergencies. However, it often leads to a penalty, lower interest earnings, and potential tax implications.

• IndusInd Bank FD Premature Withdrawal Penalty: IndusInd Bank usually charges a penalty of up to 1% on the interest rate applicable for premature FD closures. These IndusInd Bank FD premature withdrawal charges are deducted from the original FD interest rates. But the auto-sweep FDs are exempted from this penalty. The limited-time waivers may be applicable during promotional periods.
• Loss of Expected Interest Earnings: IndusInd Bank FD premature withdrawal will incur the loss of the original FD interest rate benefits. Rather, the IndusInd Bank recalculates the interest based on the applicable rate for the actual holding period and then deducts the penalty.
• Impact on Linked Loans: If the FD is being used as collateral for a loan, premature withdrawal may not be allowed until the loan is fully repaid. In such cases, you will need to obtain a No Objection Certificate (NOC) from the bank confirming that all dues are cleared.
• Restriction on Credit Card Against FD: If your FD is linked to a credit card issued by IndusInd Bank, you cannot close the deposit until outstanding dues are settled. The FD will remain locked as collateral until you submit the required NOC.
• Processing Delays in Offline Mode: While digital closures are faster, premature withdrawal through offline channels may take time. It involves visiting the branch, completing paperwork, and waiting for internal approvals, making the process lengthy if you are unfamiliar with banking formalities.

Tax Implications on IndusInd Bank FD Premature Withdrawal

If you withdraw your IndusInd Bank Fixed Deposit before maturity, the bank will recalculate your interest based on the actual tenure. The corresponding interest is fully taxable under “Income from Other Sources” in your income tax slab.

If the total interest in a final year exceeds ₹50,000 (for regular individuals) and ₹1,00,000 (for senior citizens), then Tax Deducted at Source at 10% is applicable, as per Section 194A of the Income Tax Act. Failing to submit your PAN can lead to higher TDS, i.e. 20%.

You can avoid excess TDS by submitting Form 15G or 15H right from the beginning of the financial year. You must report the interest accurately when you file your income tax return.

How to Avoid IndusInd Bank FD Premature Withdrawal?

To safeguard your fixed deposit returns and minimise penalties, consider the following strategies before opting for early closure:

• Plan Your Tenure Wisely: You can opt for an FD tenure that matches your financial objectives and expected liquidity needs. You benefit from flexible terms (ranging from 7 days to more than 5 years) with IndusInd Bank. You can use an FD calculator to choose an appropriate tenure to reduce the risk of early closure and wisely plan your investment.
• Plan for Liquidity: Keep a part of your portfolio in liquid assets. This ensures access to cash without affecting your FD in case of emergencies.
• Create Multiple FDs in IndusInd Bank: Split your total investment into several small FDs (for example, ₹50,000 can be split into five ₹10,000 FDs). In scenarios when you need funds, you can withdraw a single FD and retain the remaining so that you don’t incur any penalties.
• Maintain an Emergency Fund Separately: It is recommended to always maintain a separate emergency fund in either liquid instruments or a savings account to manage unexpected expenses. As a result, you don’t have to use your original FD and thus your long-term investment goals will be maintained.
• Use Sweep-out or Flexi Deposit Options: IndusInd Bank provides sweep-out FDs. With this option, the surplus funds from your savings account are automatically converted into FDs. You can reverse it when required. This flexibility benefits you with liquidity, without incurring a loss of interest.
• Use Overdraft or Credit Card Against FD: Rather than closing your FD, you can apply for an IndusInd Bank credit card against FD or use an overdraft facility. Such options allow you to borrow funds against your deposit, and it continues earning interest.

Key Takeaways

You can withdraw your IndusInd Bank FD before maturity, but a penalty of up to 1% may apply on the applicable interest rate. Closing your FD is possible online or offline at the branch. Early closure may reduce interest earnings, affect facilities like IndusInd Bank credit card against FD, and trigger TDS. To minimise the penalty, consider opening a cumulative FD. It compounds interest and pays it at maturity. These FDs often attract lower charges on early closure compared to non-cumulative options. If you are a senior citizen, look for special FD schemes. These offer higher interest rates and sometimes lower penalties for early withdrawal.