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Premature Fixed deposit tax treatment

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sachin Alwadhi

cma

233 Points Posted on 18 June 2021

Kindly guide if we withdraw our Fixed deposit with bank before maturity period then what will be the treatment of Fixed deposit withdrawl before maturity period ?Whether taxable or exempted income while filing ITR .

Regards

Sachin Alwadhi

Replies (2)

Quick Summary

If you withdraw a Fixed Deposit before its maturity date, the principal amount you get back is not taxable. However, any interest earned on the FD up to the point of withdrawal is considered taxable income. Banks often charge a penalty for early closure, which is deducted from the interest earned. You should declare the net interest income in your tax return.

CMA Poornima Madhava

CMA

13117 Points Posted on 18 June 2021

FD as such is not taxable. For pre-closure of FD, banks usually charge penalty which will be a cut from the interest. Net interest income is taxable.

veerendar singh

tax consultant

3306 Points Posted on 19 June 2021

Sachin you have to find out the interest income for the relevant year and offer only the interest income for taxation
the return of pricipal amount is not taxable on premature withdrawal