With most investments, you're better off waiting until maturity. But life doesn't always allow that, and sometimes you need the money early.
You can close a Post Office Time Deposit Account early, but only after six months from the date of deposit. A 5-year deposit opened on or after 10 November 2023 can't be closed until four years have passed.
There are conditions, though. On a premature withdrawal you get your deposit back straight away, with interest worked out at a lower rate than the one you signed up for. Any yearly interest already paid to you at the full rate is recovered from the payout.
Here's an example. Mr. X opens a 2-year time deposit of 1 lakh rupees on 1 November 2026 at 7.0%. Six months later, on 1 May 2027, he needs money and wants to withdraw the whole amount. He's allowed to, because six months have passed. Because he closes it before one year, he gets simple interest at the post office savings account rate (4% a year) for the six completed months: 2,000 rupees. So he receives 1,02,000 rupees on the day he closes the account.
How much interest you get on a premature withdrawal
For 1, 2 and 3-year deposits (and 5-year deposits opened before 10 November 2023)
- No deposit can be withdrawn within six months.
- If it is withdrawn between six months and 1 year, simple interest is paid at the post office savings account rate in force at the time.
- If a 2-year or 3-year deposit is withdrawn after 1 year, interest for the completed years is paid at 2 percentage points below the rate for a 1-year or 2-year deposit, as the case may be, and at the savings account rate for any part year. A 5-year deposit opened between December 2019 and 9 November 2023 gets 2 points below the 1, 2 or 3-year rate (depending on how long it ran), or the full 3-year rate if it is withdrawn after four years.
For 5-year deposits opened on or after 10 November 2023
- No withdrawal is allowed before four years.
- If the deposit is withdrawn after four years, interest is paid at the post office savings account rate.