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Renewals and Withdrawals of Fixed Deposits

Banks offer many investment instruments to their customers. Investment instruments could be in the form of various deposit schemes with low risks and safe returns. fixed deposit is one such investment instrument where the money deposited earns a predetermined rate of interest, over the duration decided by the bank. It provides a higher rate of interest than saving deposit investment plans. However, with a higher return, money remains blocked as one cannot withdraw the amount deposited. Withdrawal from the deposit is only possible by liquidating the deposit. Whereas, where fixed deposits attain maturity, the customer has two options- renew the deposit or to withdraw from the deposit scheme.

It is important to maintain a list of investments made in deposits along with the maturity dates so that if one does not renew on maturity, then it can be automatically renewed. Automatic renewal can be disadvantageous if a lower rate of interest is paid by the bank. Pre-mature withdrawal can also lead to penalty and hence, one needs to wisely think before making such a decision.

Renewal of Fixed Deposits

When a deposit reaches maturity, FD can be automatically renewed or withdrawn. Auto-renewal shall be for the same period and at the same rate of interest as the one which has matured. The decision to auto-renew the deposit should depend on the requirement of funds in the near future.

Withdrawal of Fixed Deposits

Withdrawal of Fixed Deposits is possible in two ways:

  • Where auto-renewal is not selected by the customer, the bank transfers money receivable on maturity into a pre-selected savings account.
  • Pre-mature withdrawal, where customer withdraws the amount before the maturity of deposit. This may attract penal charges.

FAQs on Fixed Deposits Withdrawal and Renewal

Can I break my 5 years fixed deposit?

Five-year fixed deposits are tax saving deposits and they cannot be withdrawn pre-maturely. The only exception to the rule is the death of the investor.

Can I close tax saver Fixed deposit?

A tax saver Fixed Deposit can be closed only on maturity and not before the specified duration of five years.

Can I renew a fixed deposit online?

Fixed Deposits can be renewed online if the same has been opened online.

Can I withdraw FD from another branch?

Encashment of FD from another branch is only possible if the FD has been made online. Where FD certificate is in physical form, it shall first be cancelled from where it is opened. It shall then be transferable on giving a written application.

Can I withdraw interest from the fixed deposit?

Yes, interest can be withdrawn from the fixed deposit as and when received in the savings a/c of the depositor.

Can I withdraw my time deposit anytime?

Yes, withdrawal can be done anytime from time deposit subject to payment of penalty. However, 5-year tax savings cannot be withdrawn.

Can we withdraw the fixed deposit before maturity?

Yes, fixed deposits can be withdrawn before maturity.

Can we withdraw money from the fixed deposit before maturity from HDFC bank?

Yes, money can be withdrawn from a fixed deposit before maturity. It is allowed by HDFC banks.

How can I close my FD in Axis Bank Online?

One can close FD in Axis Bank through two online modes. These are internet banking and Axis mobile application.

How can I transfer money from FD to another bank?

A transfer is possible from one branch to another, only if the deposit has been opened online. If FD certificate is in the physical format, then it shall first be cancelled in the branch in which it is opened and then transferred in the desirable branch by making a written application.

How do I stop my fixed deposit from automatically renewing?

Instructions regarding auto-renewal shall be given to the bank regarding automatic renewal of FD. These are maturity instructions given to the bank by the deposit holder.

How is the penalty calculated on premature withdrawal of fixed deposit?

Levy of penalty varies from bank to bank. Where FDs are kept for a duration of 7 to 14 days, a penalty is not levied on premature withdrawal. Generally, a charge of 0.55% to 1% of the FD amount is levied by banks. Amount of penalty is deducted from the interest amount and balance is transferred to the specific savings account.

Is FD transferable?

FD is transferable to the nominee on death of the holder. The nominee is decided by the holder. Or in case of joint holders, it shall be transferred to another holder in the event of the death of one of the holders.

What happens if FD is not renewed?

Instructions are given to the bank by the deposit holders regarding action to be taken on the maturity of the instrument. However, where no such instructions are given, the bank shall send a notification to the investor. Here, the investor directs any instructions within fourteen days, and the bank shall act upon such instructions provided. Where the investor does not communicate with the bank, then bank shall renew the deposit at the same rate automatically.

What happens if I break my fixed deposit in SBI?

If fixed deposit in SBI is withdrawn before maturity, a penalty of 0.50% is levied if the value of FD is below Rs. 5 lakhs. If the value of FD is from Rs. 5 lakhs to Rs. 1 crore, a penalty of 1% shall be levied. Where withdrawal is within seven days of the time period for which deposit is kept, interest shall not be provided.

What happens when a fixed deposit holder dies before maturity?

In the event of the death of the deposit holder, the deposit is transferred in the name of the surviving holder. And if the fixed deposit is not a joint account, then maturity proceeds shall be transferred to nominee. Where there is no nomination, then the person claiming right over such deposit shall have to prove his stance to claim the maturity proceeds.

What happens when the fixed deposit matures?

When a fixed deposit matures, it gets renewed automatically if no instructions are provided and the same is not withdrawn. If the same is withdrawn, then the maturity amount shall stand transferred to specific savings bank account of the holder.

What is liquidation of a fixed deposit?

Liquidation of a fixed deposit is a feature of fixed deposit scheme in which the individual has the flexibility of premature closure of the fixed deposit. It is to be noted that partial withdrawal is not allowed when an individual decides to liquidate the fixed deposit.

What is meant by tenure in a fixed deposit?

The tenure in a fixed deposit denotes the time period for which the deposit has been placed with the bank.

What is the rule of fixed deposit?

The basic rules of fixed deposit are:

  1. Interest received on fixed deposit in the name of a minor child shall be taxed in the hands of parents as per tax rules.
  2. Interest on fixed deposit is subject to TDS u/s 194A if interest income exceeds Rs. 40,000
  3. Renewal of FD is subject to instructions as provided to the banker by its customers.
  4. Premature withdrawal is allowed on payment of penalty charges.
  5. On maturity, proceeds can either be renewed or withdrawn depending upon the decision as taken by the investor.