Everything about Recurring Deposit premature closure

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Recurring Deposit is one of the most popular term deposit schemes among Indians. It allows the investors to save certain amount every month and the interest rates in RD are almost equal to FD. These are 6 important FAQ’s on Recurring Deposit premature closure in India

1. How to break the Recurring deposits prematurely?

The same kind of procedure that is followed to break the FDs prematurely is used to break the Recurring deposits before the maturity period. In this situation, the interest shall be paid at the rate that is applicable during the time of the deposit, only for the time for which the concerned deposit has been remained with the bank. The premature breaking of the RD also follows a penal rate of interest as directed by the bank on the very date of the deposit.

2. Does bank charge any penalty on the premature breaking of the recurring deposit?

The penalty of premature breaking of the recurring deposit varies from bank to bank. For e.g., the Canara Bank charges a penalty of 1 percent on the premature breaking of the recurring deposit. The bank immediately breaks your recurring deposit after making the calculation of the concerned interest and the penalty so charged.

3. Do all the banks charge penalty on breaking the recurring deposit before maturity?

There are various banks that do not charge any penalty for the premature breaking of FDs as well as RDs. These banks are IDBI Bank Freedom Deposit, Yes Bank, ING FD+ and Axis Bank in terms of NRE Deposits.

4. What all deductions shall be made in the premature breaking of the Recurring Deposit?

The banks deducts the incentives that it has previously offered on any single deposit along with the penal interest while breaking your recurring deposit prematurely.

5. Would there be any kind of Tax Deduction at Source for recurring deposit?

Yes, in a budget prepared under 2015, an introduction for TDS has been made on the recurring deposit. Amendments have been made to section 194A which says that any income above Rs. 10,000 will absolutely attract Tax deduction at Source in the recurring deposits. But no interest shall be charged for the TDS upto Rs. 10,000 of income.

6. Would multiple number of recurring deposits attract the Tax Deduction Source?

If an individual is a holder of multiple recurring deposits with the same bank, the cumulative interest on the income will attract the TDS. This will happen only if the income exceeds beyond Rs. 10,000.

 

If you have any doubts regarding RD premature closure, kindly leave as comments. We would try our level best to address those.

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35 Comments

  1. oyang says

    after closing e-rd i sbi by what time the amount will reflect in my account?

  2. Sowmya says

    How to close the rd wat is the procedure

  3. Sowmya says

    Hi sir, i have opened RD in hdfc earlier this month but now i want close that because of my financial situation .
    How much percent of amount I’ll get back if i break that now and will I face any problems in taxes in future pls help

    1. Mohammad Ali says

      Hi Sowmya, In case of premature withdrawal the deposit may be subject to a penal rate of interest as prescribed by the Bank on the date of deposit.

  4. shivam says

    Sir I started rd accoount in pnb and after 1 term I dinnot paid I wnt to close any loss of myne?

    1. Mohammad Ali says

      Hi Shivam, 1% penal interest shall be charged at the time of premature cancellation or part withdrawal for Recurring Deposit in PNB

  5. amit says

    I want to withdraw my premature RD by Netbanking in kotak mahindra bank.
    But i am not getting any direct option there.
    can somebody suggest me the step that needs to be follow in order to withdraw my amount?

    Costomer care are not responding
    Thanks in advance

    1. Mohammad Ali says

      You can directly visit the bank and file a complaint.

  6. Kunaljit dutta says

    Sir I have been continuing a reccurring deposit for a term of one year of rs 4000 per month .. but due to some financial crisis I could not pay the monthly amount for the last two months.. how much money will I get on maturity???
    I have paid for 10 months only..

  7. Sameer says

    I HAD PAID THREE YEARS RD IN POST OFFICE AND AFTER THREE YEAR I COULD NOT DEPOSITE 2 YEAR INSTALMENT..HOW MUCH AMMOUNT CALCULATED FROM DATE OF OPENING

  8. Venkat says

    Hi
    If I started my Rd(12 months) with 10k as my first month installment and due finical issues..so instead of that can I pay 5k on second month …can the months installments be up and down …is it applicable. Waiting for urs valuable info..
    Thanks

  9. Zeherul Islam says

    Hi, I have a RD account on SBI which is going to maturity on 19th Oct.what happen if i couldn’t able to contact with branch after maturity.

    1. Mohammad Ali says

      Hi Zeherul, Your maturity amount will not automatically credited to your saving account. You can transfer it to your saving account only from which you paid installment amount.
      For e-Rd customers, there are two options to select: “Payback Principal and Interest” will transfer the maturity to your debit account on maturity. “Convert to STDR” option will create a fixed deposit for period selected by you with the maturity amount.

  10. Nanda says

    Hi, I have opened an RD with Deutsche bank using their online website. I called them up to close the RD account, but they are saying that they cannot close if account is opened online. Is this true? sounds weird to me..

  11. Lohith says

    Hi Sir,

    I have opened RD with post office 1 year back. Now I want to break it. Is it possible to break and what will be the penalty ?

    Thank you

    1. Mohammad Ali says

      Hi Lohith, you can close your post office RD only after 3 years.\

      But one withdrawal up to 50% of the balance allowed after one year.

  12. sandip says

    how to close axis rd

    1. Mohammad Ali says

      You can directly visit the branch to close your RD or also you can close RD using your AXIS netbanking

  13. Anand V Deshpande says

    Dear Sir,
    Please let me know exact calculations on PreMaturity of RD Account.

    1. Mohammad Ali says

      Calculations on prematurity of RD:
      The maturity amount is based on the installment and tenure. The maturity value of RD is rounded off to the nearest rupee and paid after 30 days /one month deposit of last installment or on the expiry of the period, for which the deposit was accepted, whichever is later.

      If the depositor opts for premature closure, 1% penal interest (some banks charges 2%) shall be charged on the rate applicable for which the deposit remained with the bank

  14. R.S.Gupta says

    Dear Sir.

    I had opened a recurring account in post office from Rs.5,000/- per month.
    Now I want to breack up it after 3 years. Please tell me how many interest
    will be found by me.

    1. Mohammad Ali says

      Hi Gupta, Premature closure permissible allowed after 3 years and only SB rate is permissible

  15. harish says

    how to close hdfc rd

    1. Mohammad Ali says

      Hi Harish, If you wish to close your Recurring Deposit, you have to submit your Recurring Deposit advice, duly signed by all account holders, at the branch or you can use “Liquidate RD” from your online account to close your RD.

  16. Nishita says

    kindly answer the dr’s question that what in case if a rd account holder dies while his rd is on ?? can a nominee continue it till its maturity or not ?? if not then the penalty is applicable or not ???

    1. Mohammad Ali says

      Hi Nishita, In the event of death of the depositor before the date of maturity of deposit and amount of the deposit is claimed after the date of maturity, the bank shall pay interest at the contracted rate (depends upon each bank) till the date of maturity.
      Nominee can’t continue that RD. Nominee can claim the RD before maturity but Pre-mature RD interest rate is applicable and will be 1.00% below the normal rate.

  17. Manish Purani says

    I’m having RD account in Axis and now it is 7 months. If I withdraw now; what will be the penalty amount? Please reply…

    1. Mohammad Ali says

      Hi Manish, Pre-mature RD interest rate will be 1.00% below the normal rate, prevailing as on the date of deposit, as applicable for the period the deposit has remained with the bank or 1.00% below the contracted rate, whichever is lower.

  18. Rahul says

    I have Rd account in SBI of 12 months, I need money now can i withdraw money now 8 months completed

    1. Mohammad Ali says

      Yes you can Rahul, Interest will be calculated only for these period.

  19. NITYANANDA PAUL says

    DEAR SIR I HAVE A RD AC FOR 12 MONTH AND PAID INSTALLMENT FOR 10TH ONLY,BUT I HAVE CLOSED MY RD AC AFTER DUE DATE.BUT THE BANK HAVE PAID INTEREST LESS 1% AS PER PREMATURE FORMULA.IS IT RIGHT OR WRONG PROCEDURE ? SUGGEST ME.

  20. AJIT KUMAR SRIVASTAVA says

    Dear Sir, I have started Rs.5,000/- per month Recurring Deposit in IDBI Bank Ltd. for one year. Due to financial problem i have broken my RD after 3 months completed. Bank has returned Rs. 15,000/- without interest. So Bank Will be paid to me interest or not ? i discussed with bank manager, he said interest not to be paid. May Kindly suggest me.

    1. Mohammad Ali says

      You should hold for atleast 6 months to get any interest from your RD account.

  21. dr. r.n. tandon says

    please let me know if the panel interest is chargable on premature closure of RD / FD on holders death,