FD premature withdrawal penalty 2026. SBI charges 0.50-1%, HDFC 1%, ICICI 1%. When breaking FD makes sense. How to calculate penalty. Tax implications of early FD withdrawal.
By FinMandi TeamMay 8, 20268 min read✓ May 2026 Updated
👨💼
Reviewed by FinMandi Research Team
Backed by 10+ years of banking experience · Verified May 2026
✓ RBI Sources✓ Bank Verified✓ May 2026
Quick Summary
Most banks charge 0.50% to 1% penalty on premature FD withdrawal
SBI: 0.50% for FDs up to Rs 5 lakh, 1% above Rs 5 lakh
HDFC, ICICI, Axis: 1% penalty across all amounts
Small finance banks: 0.50% to 1% depending on tenure completed
Tax saving FDs (80C): No premature withdrawal allowed under any circumstance
Breaking FD makes sense when: savings rate elsewhere is 2%+ higher after penalty
TDS is deducted at 10% on interest earned even on broken FDs
Bank-wise FD Premature Withdrawal Penalty 2026
Bank
Penalty Rate
Minimum Tenure for Full Rate
SBI (up to Rs 5L)
0.50%
Applicable tenure completed
SBI (above Rs 5L)
1.00%
Applicable tenure completed
HDFC Bank
1.00%
All amounts
ICICI Bank
1.00%
All amounts
Axis Bank
1.00%
All amounts
Kotak Mahindra
0.50%
All amounts
PNB
1.00%
All amounts
Tax Saving FD (all banks)
Not allowed
5-year lock-in mandatory
How is Premature Withdrawal Penalty Calculated?
The penalty is applied to the rate applicable for the period the FD was actually held — not the original booked rate. Here is an example:
You book a 2-year FD at 7% p.a.
You break it after 8 months
Bank's 6-9 month rate = 5.5%
Penalty = 1% → effective rate = 4.5%
You receive interest at 4.5% not 7%
Important: Always calculate the penalty before breaking an FD. If you need funds urgently, consider taking a loan against FD instead — most banks offer up to 90% of FD value at 1-2% above FD rate. This avoids losing the principal FD interest entirely.
When Does Breaking FD Make Sense?
New FD offers higher rate: Break if new rate minus penalty is still 1.5%+ higher
Emergency cash need: Breaking FD is cheaper than personal loan at 12-18%
Switching bank: Calculate total gain over remaining tenure before deciding
Yes, most banks allow premature withdrawal of FDs. However they charge a penalty of 0.50% to 1% on the applicable interest rate. Tax saving FDs (5-year lock-in under Section 80C) cannot be withdrawn prematurely under any circumstances.
No, breaking an FD does not affect your CIBIL score in any way. FDs are deposit products, not credit products. Your CIBIL score is only affected by loan repayments, credit card payments and other credit-related activities.
Yes, taking a loan against FD is almost always better than breaking it. Banks offer up to 90% of FD value as a loan at just 1-2% above your FD rate. You keep earning FD interest while using the loan amount. Only break FD if you need the full amount and repayment timeline is uncertain.
📋 Sources & Methodology
Data sourced from: RBI official website · Official bank websites · SEBI · IRDAI · Ministry of Finance press releases. Rates and data verified by FinMandi Research Team. Last verified: May 2026. FinMandi does not accept payment to rank any bank or product.
Disclaimer: All information is as of May 2026 and subject to change. This article is for educational purposes only. Please verify all rates and rules directly with the relevant institution before making financial decisions.