Before closing SBI FD, what is the minimum time one must hold an FD there?

There is no minimum time. The FD can be taken at any moment; shorter times could be related to little or no interest.

Should I close the FD after one year, will one be entitled to full interest?

No, you will be paid the interest for the one-year term, less the penalty (usually 0.50%).

Would breaking the FD early help prevent TDS?

No. Even in cases where the FD is broken, the TDS deduction results from the overall interest accumulated.

With the SBI form for offline FD closure, what paperwork does one need?

You must visit there bearing a duly filled premature FD closure form from the branch, a valid identity proof (Aadhaar, PAN), and an FD receipt.

Will SBI let an individual know the payoff upon closure?

The last sum is credited to your savings account, thus you can check on this using net banking, passbook, or SMS.

SBI FD Premature Closure - Charges & Process

Fixed Deposits are one of the most preferred investment options in India. Many investors prefer FDs because of the guaranteed returns and safety aspects. But sometimes, emergencies and changes in financial needs may force an investor to withdraw funds before maturity. This is commonly termed as the premature closure of the FD SBI. For such cases, knowledge of SBI premature FD closure charges holds a lot of importance to avoid unnecessary losses.

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Let’s understand the charges, process, impact on interest, and tax implications of closing an FD prematurely with SBI.

What Is the Premature Closure of FD SBI?

Premature FD closure in SBI refers to the situation where the fixed deposit account holder requests to terminate the deposit before the completion of its originally agreed-upon maturity period. This could be in light of some urgent financial need, better investment choices, or due to personal reasons.

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SBI Premature FD Closure Charges, Explained

Any premature withdrawal of an FD will entail the application of a penalty on the SBI FD rates. Hence, the interest earned shall become less than that contracted initially.

The premature FD closure charges SBI are as follows:

For Term Deposit up to ₹5.00 lakh, the penalty for premature withdrawal will be 0.50% (all tenors).
For Term Deposits above ₹5.00 lakh, the applicable penalty will be 1.00% (all tenors).

Example:

If you booked an FD for 2 years at 6.50% interest but closed it after 1 year when the applicable interest rate is 6.00%, and if a 0.50% penalty applies, your effective interest rate becomes 5.50%.

FD interest rates India have fallen consistently over the last 12 years.

Invest in Plans that offer Guaranteed Returns for over 25 Years

When Are No Charges Applied?

SBI waives premature FD closure charges under the following conditions:

If the deposit amount is below ₹5 lakh and the FD is held for less than 1 year.
If the closure is because of the death of the depositor.
If the deposit is in the name of senior citizens, then some relaxed rates or waivers may be given, depending on the scheme.

How to Close Your SBI FD Prematurely?

There are two ways you can close your SBI FD prematurely, which can be done both online and offline:

Online FD Closure (through SBI Netbanking or YONO App)
- Log into your SBI NetBanking or YONO SBI app.
- Go to Fixed Deposit.
- In the Fixed Deposit screen, go to Close FD prematurely.
- Select the FD account to be closed.
- Confirm the request for closure.
Offline FD Closure
- Visit the nearest SBI branch.
- Carry your FD receipt, identity proof (like Aadhaar or PAN), and a duly filled FD closure form.
- Submit your request for a premature withdrawal.

Tax Implications of Premature FD Closure

Interest earned on an FD is taxed, even if the FD is closed prematurely. Here are the main things you need to know:

TDS (Tax Deducted at Source):
- When the total FD interest income from any bank is more than ₹40,000 (₹50,000 for senior citizens) in any financial year, SBI deducts TDS at a rate of 10%.
- If one does not provide their PAN, then TDS is deducted at a higher rate of 20%.
- TDS is deducted even if the FD is prematurely closed.
Section 80C of the Income Tax Act:
- Tax-saving FDs (with a lock-in of 5 years) are deductible under Section 80C to the extent of ₹1.5 lakh.
- If a tax-saving FD is prematurely withdrawn, then it ceases to qualify for deduction under Section 80C.
- Also, all interest on such FDs shall be included in taxable income.

Points to Consider Before Premature Closure

Here are some tips to avoid high premature FD closure charges in SBI:

Compare penalty vs loan option:

If you really need funds on an urgent basis, consider taking a loan against your FD instead of closing it prematurely. SBI offers loans up to 90% of the FD amount at attractive rates.
Split your FDs:

Instead of one big FD, split it into smaller ones of different tenures. This would allow you some flexibility if you needed to break one without disturbing the rest.
Check reinvestment options:

Sometimes, breaking and reinvesting at a higher rate (if market rates rise) may still be worth it after paying the penalty.

*Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Key Takeaway

Premature closure of FD SBI is permitted but attracts penalties on interest and certain tax implications. One should know the premature FD closure charges SBI levies on the deposits as on their amount or tenure. Planning your investments carefully can help to avert these losses, as SBI does provide a loan/overdraft facility against FDs and may offer sweep-in facilities or alternatives for partial withdrawal during emergencies.

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FAQs

Before closing SBI FD, what is the minimum time one must hold an FD there?

There is no minimum time. The FD can be taken at any moment; shorter times could be related to little or no interest.
Should I close the FD after one year, will one be entitled to full interest?

No, you will be paid the interest for the one-year term, less the penalty (usually 0.50%).
Would breaking the FD early help prevent TDS?

No. Even in cases where the FD is broken, the TDS deduction results from the overall interest accumulated.
With the SBI form for offline FD closure, what paperwork does one need?

You must visit there bearing a duly filled premature FD closure form from the branch, a valid identity proof (Aadhaar, PAN), and an FD receipt.
Will SBI let an individual know the payoff upon closure?

The last sum is credited to your savings account, thus you can check on this using net banking, passbook, or SMS.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
+ Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
#Discount offered by insurance company
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ ˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

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