Shriram Finance FD Premature Withdrawal

What is Shriram Finance FD Premature Withdrawal?

Shriram Finance FD premature withdrawal is the process of withdrawing your fixed deposit before its maturity date. However, it’s essential to understand the impact of premature withdrawal. The lock-in period is 3 months, during which withdrawal is not allowed, except in the event of the investor’s demise. 

If you withdraw your FD between 3 and 6 months, no interest is paid, and only the principal is returned. After 6 months, the revised Shriram Finance FD rates come into effect. This means that for tenures between 6 to 12 months, the rate will be 3% lower than the 12-month rate. For each subsequent tenure, the rate will be 2% lower for tenures ranging from 12 months to 60 months.

How to Close a Shriram Finance FD Prematurely?

Shriram Finance offers both online and offline services for premature FD withdrawal. The process is detailed below:

Online Closure Process

You can start premature withdrawals in Shriram Finance FD using the online portal or mobile application:

• Go to the Shriram Finance site, or you can open the Shriram Finance mobile app (Shriram One).
• Log in with the help of your registered credentials.
• Visit the Fixed Deposit section and select the FD to close.
• Click Premature Closure and review the amount of interest and penalty.
• Request confirmation to carry on with the closure.
• The net amount, after deducting Shriram Finance FD premature withdrawal charges, will be credited to your linked bank account.

Offline Closure Process

If you prefer an offline procedure, follow these steps:

• Visit your nearest Shriram Finance branch.
• Request the premature FD withdrawal form from the counter.
• Fill in details such as FD account number, investor name, deposit amount, and closure request.
• Attach a valid ID proof such as Aadhaar, PAN, Passport, or Voter ID.
• Submit the original FD receipt along with the filled form.
• After verification, the amount, post deduction of penalty, will be credited to your registered bank account.

Disadvantages of Shriram Finance FD Premature Withdrawal

Premature withdrawal can be beneficial during emergencies, but it comes with drawbacks. These include:

• Manual Verification and Time Consumption: Investors choosing the offline option must also provide physical files and the original FD receipt. This authentication method is time-consuming, especially for those who are not familiar with it.
• Effect on Linked Credit Facilities: When FD is offered as collateral to borrow a loan or a credit facility, the premature closure will lead to modification or cancellation of the facility, reducing your borrowing or credit access limit.
• Shriram Finance FD Premature Withdrawal Penalty: Closing your FD before maturity comes with a Shriram Finance FD premature withdrawal penalty. Thus, resulting in lower FD interest rates based on the actual holding period, thereby reducing your final returns.

Tax Implications on Shriram Finance FD Premature Withdrawal

Suppose you withdraw your Shriram Finance FD before its maturity. In that case, the amount of interest to be paid will be refunded, depending on the actual time during which the deposit was maintained. This interest will be taxed under the category Income from Other Sources, and Tax will be paid according to your respective tax bracket. 

As per the Income Tax Act, Section 194A, the Tax Deducted at Source (TDS) is set at 10% on the amount of interest that an investor gets in a financial year that exceeds ₹50,000 in case of non-senior citizens (₹1,00,000 in case of senior citizens). Lack of submission of PAN results in the payment of Tax Deducted at Source (TDS) of 20%. In order to avoid TDS, the elderly citizens will have to submit Form 15H, and the other qualified investors can submit Form 15G. 

Note: To ensure that you do not report the FD interest income wrongly when filing your Income Tax Return (ITR), to avoid discrepancies between your reported income and bank records.

How to Avoid Shriram Finance FD Premature Withdrawal?

To prevent loss of interest and penalties, consider these strategies:

• Select the Right Tenure: Choose your FD investment according to the expected expenses. The FD calculator will help you to align the cash flow with the appropriate tenure and prevent the closure of the FD prematurely.
• Split Investments into Multiple FDs: You can split the large corpus of your investment into multiple FDs as well. For example, an FD of ₹2,00,000 should be split into four smaller deposits of ₹50,000 each. In case of an emergency, you can only close a single FD instead of the entire sum, which will reduce the losses on premature withdrawal charges of the Shriram Finance FD.
• Maintain an Emergency Fund: Have 3-6 months of expenses in a liquid fund or savings account so that in case of an unforeseen event, one does not necessarily have to take out FDs.
• Select a Sweep-In or Flexi FD: Some of the investors prefer sweep-in or flexi fixed deposits, in which surplus money will automatically be transferred into FDs and withdrawn when it is required. This provides liquidity without necessarily closing the FD.
• Use an Overdraft or Loan against FD: Instead of prematurely closing your FD, you may use an overdraft or loan against your Shriram Finance FD. This will help you meet your short-term liquidity needs, and your deposit will continue to earn interest.

Key Takeaways

The Shriram Finance FD early withdrawal is flexible and has some conditions and penalties. It has both online and offline alternatives, where offline processes take more time. Premature closure may interfere with long-term financial objectives and other associated credit facilities. Interest is not paid on the withdrawn sum for 6 months, and is reduced by 2-3 % after 6 months. The interest is also taxed in the segment of Income from Other Sources, and TDS can be applied in cases when the interest is more than the threshold limit. Planning FDs, keeping an emergency fund, and evaluating other sources of liquidity are practical measures to avoid penalties.