Mahindra Finance FD Premature Withdrawal

What is Mahindra Finance FD Premature Withdrawal?

Mahindra Finance FD premature withdrawal allows depositors to take early access to money to address urgent financial requirements. However, early withdrawal has an impact on the returns, where the interest is recalculated on the basis of the Mahindra Finance FD rates that apply to the actual tenure taken. 

There is no interest applicable when the FD is withdrawn in a period before six months from the opening of the FD, and you’ll receive only the principal amount. And, after six months, the Mahindra Finance FD premature withdrawal penalty would be charged at 3% on withdrawals within 1 year, and 2% on withdrawals beyond 1 year, up to the maturity date. 

Investors must therefore consider the terms, penalties and effect on returns before they can make a decision to withdraw their FD prematurely.

How to Close a Mahindra Finance FD Prematurely?

Mahindra Finance offers both online and offline modes for premature FD closure, allowing customers to choose whichever method is convenient.

Online Closure Process

To complete your Mahindra Finance Fixed Deposit closure online, follow the steps:

• Register on the Mahindra Finance FD customer portal or mobile application.
• Go to the Fixed Deposit section.
• Choose the account of the FD that you want to close.
• Select the option of Premature Withdrawal.
• Check the new FD interest rates and the Mahindra Finance FD premature withdrawal charges.
• Confirm request to proceed with closure.
• Upon approval, the approved amount is reflected in the registered bank account.

Offline Closure Process

Closing Mahindra Finance FD prematurely can be achieved through offline channels as well. Follow these steps:

• Go to the local Mahindra Finance branch.
• Request the Fixed Deposit Premature Closure form.
• Register depositor details, FD account number and other details required.
• Provide the signed form and a valid identification document.
• The branch will verify your request and process closure with the applicable penalty.
• As soon as it has been processed, the amended payout will be placed into your related savings account.

Disadvantages of Mahindra Finance FD Premature Withdrawal

Before opting for premature closure, it is crucial to understand the drawbacks that may affect your final payout and financial strategy.

• Loss of Planned Financial Benefits: You might have kept your fixed deposits for some financial goals such as school fees, down payments or emergency expenses. When they are closed early, it interrupts long-term planning and may lead to unanticipated shortages of cash. 
• Potential Implication on Linked Services: With any linked facility, e.g. loan or overdraft, the premature closure of the deposit may result in restriction or loss of benefits in relation to such facility.
• Minimising FD Interest Earnings: When customers close their Mahindra Finance FD before the maturity date, they will lose the previously agreed-upon interest rates. Instead, Mahindra Finance recalculates the rate at which the interest will be charged in the real tenure.
• Additional Time and Documentation: Although online alternatives are available, some of the customers might find the offline process very time-consuming because of filling in forms, verification procedures, and checking of identities.

Tax Implications on Mahindra Finance FD Premature Withdrawal

In case of an FD being closed prior to the maturity, the interest is recalculated and fully taxable under Income from Other Sources. Mahindra Finance deducts Tax Deducted at Source (TDS) in cases where the net amount of interest in a financial year is higher than the relevant threshold. When PAN is filed, the TDS rate is 10% and 20% when it is not. To general citizens, TDS is deductible when the interest is above ₹50,000, and to senior citizens, it is deductible when the interest is above ₹1,00,000. 

Form 15G or Form 15H can be filled out to avoid unnecessary deductions by the eligible investors. Make sure that the adjusted interest income on a premature withdrawal is properly disclosed when you are filing your Income Tax Return (ITR).

How to Avoid Mahindra Finance FD Premature Withdrawal?

Instead of closing your FD and losing potential earnings, consider these smarter alternatives:

• Choose Tenure Wisely: Prior to investing in an FD, ensure the tenure supports customers’ short-term and long-term objectives. An FD calculator may help investors choose an appropriate term based on the cash flow requirement from planned needs decisions.
• Create Multiple FDs: Spread your investment by dividing it into a number of deposits rather than a single holding. For example, instead of having one ₹1 lakh FD, make five ₹20000 FDs.
• Maintain an Emergency Fund: Keep liquid funds in a savings account or even a sweep-in FD, rather than being forced to withdraw any of your main deposits.
• Explore Loan Options Against FD: Mahindra Finance provides loans against FDs, providing liquidity, which can be more convenient and smarter than liquidating the FD.

Key Takeaways

Premature withdrawal of Mahindra Finance FD provides flexibility to draw the funds before maturity, but it cuts off returns as the interest is recalculated and penalties are charged. The withdrawals can only be made after three months; no interest is paid on premature withdrawals between 3-6 months, 3% penalty is paid on the withdrawals between 6 months and 1 year, and 2% penalty is paid on the withdrawals after 1 year. Although this option can be used in cases of emergencies, early closure interferes with financial planning and can have an impact on associated services.