Post Office FD Premature Withdrawal — Rules, Penalty & Steps

Can you close your Post Office TD early?

Prefer a dedicated page you can bookmark? Use the Post Office TD premature-withdrawal calculator.

You have a Post Office Fixed Deposit — officially called a Time Deposit or TD — and you need the money before it matures. Before you visit the post office, you need to know the rules. They are stricter than most bank FDs, and for a 5-year TD they depend on when you opened it.

Post Office TD vs Bank FD — Why the Rules Are Different

Post Office Time Deposits are governed by the National Savings Time Deposit Scheme, 2019, notified by the Ministry of Finance (Department of Economic Affairs) — not by the RBI guidelines that govern bank FDs. The penalty rules are therefore set by the Government and are the same at every post office in India, unlike bank FDs where each bank sets its own penalty.

The key difference from most bank FDs: no Post Office TD can be closed in the first 6 months. Many bank FDs allow premature closure with a penalty even in the first few weeks. Post Office TDs do not.

First — Check When Your TD Was Opened

The premature-closure rules were amended in November 2023 (National Savings Time Deposit (Fourth Amendment) Scheme, 2023, G.S.R. 830(E), dated 7 November 2023). The Department of Posts is reported to have clarified in July 2026 that the amended rules apply only to TDs opened on or after 9 November 2023, so accounts opened before that date keep the original 2019 rules. We have not seen the official circular — if you hold a 5-year TD opened before that date, confirm the rules with your post office.

For 1, 2 and 3-year TDs the change makes no practical difference — the outcome is the same under both versions. It matters for 5-year TDs. Your opening date is printed in your TD passbook or account statement.

Premature Withdrawal Rules by Time Period

Before 6 months — not allowed

No premature withdrawal is permitted within 6 months of the deposit date, for any tenure and regardless of the reason. If you might need the money within 6 months of opening, a Post Office TD is the wrong instrument.

After 6 months, before 1 year — Post Office Savings Account rate

If you close a 1, 2 or 3-year TD after 6 months but before completing 1 year, the interest is calculated at the Post Office Savings Account rate for the completed months — not the TD rate you signed up for. (A 5-year TD opened before 9 November 2023 may be treated the same way — see below.)

Example: you open a 2-year TD and close it at 8 months. You receive the Savings Account rate (4% p.a. in October 2026) for 8 completed months instead of the 2-year TD rate.

After 1 year — 2 points below the rate for the period you completed (2 and 3-year TDs)

If you close a 2-year or 3-year TD after completing 1 year, the interest is calculated as follows:

• For the completed years: the TD rate for a deposit of that length (the 1-year rate if you completed one year, the 2-year rate if you completed two) minus 2 percentage points, compounded quarterly
• For any extra months beyond the completed years: the Post Office Savings Account rate

The rates used are the ones that applied when your account was opened — a TD keeps its opening-date rates until maturity.

Example, using the rates that have applied to TDs opened since 1 January 2024 (1-year 6.9%, 2-year 7.0%, 3-year 7.1%): you open a 3-year TD and close it after 2 years and 4 months.

• For the 2 completed years: the 2-year rate minus 2 points — 7.0% − 2% = 5.0%
• For the remaining 4 months: the Savings Account rate (4% in October 2026)

Any interest already paid out on the deposit is recovered from the closure amount.

A 1-year TD never reaches this rule — it matures at 1 year.

5-year TD opened on or after 9 November 2023 — only after 4 years

The amended rules provide for early closure of a 5-year TD only after 4 years from the date of opening. If you close it then, interest for the entire period is paid at the Post Office Savings Account rate — not the 5-year TD rate, and not a 2-point reduction.

The rules give no route for closing such an account between 6 months and 4 years. If you face genuine hardship, ask your post office — the scheme lets the Central Government relax its provisions only in cases of undue hardship. If you might need the money before 4 years, a 1, 2 or 3-year TD is the safer choice.

5-year TD opened before 9 November 2023 — the older rules may apply

If the July 2026 clarification holds, an older 5-year TD follows the original 2019 rules. Confirm with your post office before relying on this:

• After 6 months, before 1 year: Post Office Savings Account rate for the completed months
• After 1 year: the rate for the completed period (1-year, 2-year or 3-year rate) minus 2 percentage points for the completed years; Savings Account rate for extra months
• After 4 years: the 3-year TD rate minus 2 percentage points

Premature Closure Rules by Tenure — Summary Table

No TD of any tenure can be closed before 6 months.
* Older rules, as reported from the Department of Posts' July 2026 clarification — confirm with your post office.

Post Office TD Interest Rates

TD rates are set by the Ministry of Finance and reviewed every quarter. The rate on the day you open the account applies until maturity. For TDs opened since 1 January 2024 the rates have been 6.9% (1-year), 7.0% (2-year), 7.1% (3-year) and 7.5% (5-year). Check today's rates — and the current Post Office Savings Account rate — on India Post's savings schemes page.

Interest is compounded quarterly but paid annually. For a premature closure, what matters is the set of rates that applied when your account was opened.

How to Close a Post Office TD Before Maturity

Step 1 — Go to the post office where your TD is held. Carry your TD passbook or account statement and photo ID (Aadhaar, PAN or passport).

Step 2 — Fill in Form-4. Form-4 is the application for premature closure under the National Savings Time Deposit Scheme, 2019. It asks for your account number and the Post Office Savings Account number to credit the money to.

Step 3 — Submit the form. The post office staff check the deposit details, work out the interest under the rules above, and process the closure.

Step 4 — Receive the amount. The principal plus the reduced interest is credited to your Post Office Savings Account. Any interest already paid out that exceeds what the premature-closure rules allow is recovered from this amount.

Can it be done online?

If your account is linked to India Post internet banking (ebanking.indiapost.gov.in), you may be able to raise a TD closure request online — look under General Services → Service Requests → New Request. Menu names can change, and if your account is not set up for internet banking, a branch visit is required.

What "TD PREMAT Proceeds" Means in Your Passbook

"PREMAT" is short for premature closure. A passbook or statement entry like "TD PREMAT proceeds" records the money paid out when a TD was closed before maturity — the principal plus the reduced interest, after recovering any interest that had already been paid. If the amount looks wrong, ask the post office for the interest calculation.

Tax on Premature Withdrawal

The interest received on premature closure is fully taxable as income from other sources at your slab rate.

TDS: from 1 April 2026 TDS is governed by section 393 of the Income-tax Act, 2025. TDS is deducted on post office deposit interest when your total such interest in a tax year exceeds ₹50,000 (₹1,00,000 for senior citizens). If your total income is below the taxable limit, you can submit Form 121 to avoid TDS — it replaced Forms 15G and 15H from 1 April 2026.

5-year TD and the tax deduction: only the 5-year TD qualifies for the tax-saving deduction — now section 123 of the Income-tax Act, 2025 (formerly section 80C), within the overall ₹1,50,000 limit and only under the old tax regime. If you claimed it and close the TD early, check with a tax adviser whether the deduction is reversed for your case.

Alternatives to Breaking Your Post Office TD

Before closing your TD early, consider these options:

• Loan against the TD: a TD can be pledged as security to a bank (application in Form-5 with the bank's acceptance letter). The bank decides how much it will lend and at what rate — ask before you close the deposit.
• Transfer the TD: if you have moved cities, ask your post office about transferring the account instead of closing it.

Sources

• National Savings Time Deposit Scheme, 2019 (G.S.R. 922(E), 12 December 2019) and its amendments, including G.S.R. 830(E) of 7 November 2023 and G.S.R. 108(E) of 12 February 2024 (TD rates from 1 January 2024) — India Post gazette notifications
• Which accounts the 2023 amendment covers — Department of Posts clarification, July 2026, as reported by postal-staff publications (official circular not seen)
• Current small savings interest rates — India Post savings schemes
• TDS and Form 121 — section 393, Income-tax Act, 2025

Want to see which rule applies to your dates? Use the Post Office TD premature-withdrawal calculator. For how bank FDs compare — they generally allow closure at any time with a penalty set by each bank — read our bank FD premature withdrawal guide. And to track your Post Office TD maturity dates and get reminders before they arrive, Savings Reminder lets you add each TD individually without any post office login.

Frequently Asked Questions