Investment in FD schemes is exempted under Income Tax. But this is applicable for a period of 5 years or more, but penalty may have to be paid for withdrawal of pre-mature withdrawal.
Premature withdrawal in fd
FD means fixed deposit is a popular method of investment. FDs have a maturity period. According to the investor, he makes the choice according to how many years he has to deposit the money and take the returns. There is also a tax exemption in the maturity amount on FDs of 5 years or more limit. However, if you want, in case of emergency, FD can be broken even before the scheduled time. But during this time, you need to know some things. Because you can lose money due to hasty steps.
You lose interest if you break the FD before maturity. There are many types of rules regarding this in different banks. Based on which penalty is imposed. The process of withdrawing FD money ahead of time is also called pre-mature withdrawal.
How much loss happens
Investors have to pay a fixed amount to the bank as a penalty for taking premature bidroll in FD. It is usually in the range of 0.5 per cent to 1 per cent. However, some banks offer this facility on zero penalty as well. At the same time, if FDs are broken just 7 days before maturity, then many banks do not take any charge on this.
How is tax calculated
Under the Section 80C of the Income Tax Act, on the year the investor takes the FD, the tax exemption of 1.5 lakh rupees is available. This benefit is available on FD schemes up to 5 years old. If you fulfill the requirement of money in the emergency, before withdrawing it, then in the year you did it, that year, the entire amount will be added to your income, on which you have taken the benefit of income tax exemption. Apart from this, the interest received will also be added to your income. After this, you will be charged tax based on the income tax slab you will come across.
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