Through a notice published on November 7, 2023, the finance ministry revised the rules governing early withdrawals from post office fixed deposit, often known as post office time deposits.
As per the latest standards, it is not possible to prematurely terminate a post office fixed deposit (FD) with a five-year term that was started on or after November 10, 2023, until four years have passed from the date of initiation. FDs created before November 10, 2023 are covered by the earlier regulations, which permit early withdrawal under the earlier conditions. Although the implementation of a lock-in time clause may cause unease among investors, its purpose is to discourage hasty withdrawals of investment deposits for insignificant reasons, which will ultimately benefit a large number of investors.
What revised guidelines have been made public regarding the early withdrawal of post office funds?
For post office fixed deposits with varying lengths, the government modified the restrictions regarding premature withdrawal. The following is a summary of the updated rules:
- If you withdraw a one-year, two-year, or three-year post office fixed deposit between six months and a year after the deposit date, you will be charged interest at the post-office savings account rate for that time, which is usually less.
- Should a two-year or three-year post office fixed deposit be withdrawn early after one year, the appropriate interest rate for a one-year or two-year post office fixed deposit will be reduced by two percent, contingent on the specific circumstances. The interest payable will be calculated by deducting two percent from the interest rate that applies to the years of the fixed deposit that have been completed.
Premature withdrawal policies remain in effect for deposits made by November 09, 2023, or before.
Investments in post office fixed deposits established on or after November 10, 2023, are subject to the aforementioned regulations. On November 09, 2023, or before, investments in fixed deposits will be subject to the earlier guidelines on early withdrawal. The following outdated guidelines include the regulations controlling the early withdrawal of post office fixed deposits made on or before November 09:
- A post office savings account rate for the months that have been completed will be used to calculate the interest payable if a post office fixed deposit with a tenure of one year, two years, three years, or five years is withdrawn after six months but before one year from the deposit date.
- A penalty of two percent will be deducted from the applicable interest rate for a one-year, two-year, or three-year post office fixed deposit, depending on the specific term, in the event that the deposit is withdrawn early after the first year. This applies to deposits with terms of two, three, or five years.
Because post office fixed deposits provide relatively higher interest rates and guarantee a guaranteed sum of money upon maturity, many conservative investors opt for them. Additionally, investors may be prompted to reevaluate their investment plans with an emphasis on long-term perspectives as a result of the changed restrictions pertaining to these fixed deposits.
