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Time of India
3 days ago
- Business
- Time of India
Rs 4.58 crore stolen from ICICI bank customers: Broke FDs, created overdraft and personal loan; how lady relationship manager executed fraud
Such was the addiction of stock market trading that a 26-year-old girl working as an ICICI Bank relationship manager stole Rs 4.58 crore from innocent customers of the bank to do speculative investments in stock market futures and options (F&O). This young girl, did not even leave her family members as she took money from her father-in-law as well to trade in the stock market F&O. Kota, Rajasthan Police SP has revealed to us that most of these customers from whose accounts she stole the money to fuel her stock market ambitions were senior citizens who were not so tech savvy. The police also revealed that she covered her tracks and digital footprint so well that even her colleagues and the branch manager could not catch a whiff of it. It was the bank's internal audit team who managed to crack this scam and expose it. As soon as the ICICI Bank 's audit team flagged this scam, the bank's branch manager filed a FIR case against her accusing of running this elaborate scam. Based on this FIR she was arrested by Udyog Nagar police station, Kota, Rajasthan on May 31, 2025 at her sister's wedding. The charge-sheet is yet to be filed and police said it will be done once the full investigation is over. How did this 26-year-old girl manage to loot Rs 4.58 crore without anybody noticing? Dilip Saini, Additional Superintendent of Police (SP), Kota, Rajasthan told ET Wealth Online that, 'She is now 26 years old and this crime was committed by her from 2020 to 2023 i.e. during her period of employment with ICICI Bank. Our police investigation has revealed that she used multiple stock broking websites and apps like ICICI Direct, Zerodha (Kite), to trade in the derivative segment (Future and Options).' Live Events When asked how no customer of the bank noticed this scam which she ran for three years, Saini told: "She even changed the mobile number of customers to her own close relative's numbers so that they don't know about these transactions.' As the OTPs and alerts never reached the real account holders and these customers never checked their bank balance also, it was made easy for her to run this scam. When the Rajasthan Police interrogated her, she revealed that most of these illegal and unauthorised transactions were done by her through the ICICI Bank 's Insta Kiosk and digital banking channels. The police investigation found that she changed entries in the bank's internal software to hide her activities. Also read: ICICI Bank branch manager duped depositors of crores for years to meet targets She used a pool account to gather all the money she stole by prematurely broke FDs, created overdrafts and even created personal loans in customer's name She withdrew funds from FD accounts by prematurely breaking them, created overdrafts, and even took personal loans in innocent customer's names, without any of them knowing or authorising it. Saini said: "Investigation also revealed that she used a third party's account as a pool account to collect all the money she took out by prematurely withdrawing the FDs, creating overdrafts (ODs) and even personal loans in the customer's name.' She used ICICI Bank customer's online FD website to prematurely break fixed deposits belonging to 31 customers and transferred Rs 1.35 crore into unauthorised accounts. She also took out a personal loan of Rs 3.4 lakh in someone else's name and executed transactions through digital platforms such as Insta Kiosk, ATM, and internet banking — even using debit cards of four unsuspecting customers. A pool account is an account where all the collected money from the other FD, OD, loan accounts are deposited in a single place and from here she then transfers the money to her demat account. This method saved her time, as managing money from 40 or so bank accounts is more difficult than doing it from one single account. Saini explained: 'Moreover, our investigation also revealed that she even took money from her father-in-law and invested that in the stock market. It seems from our investigation that despite losing money in the stock market trades, she used to invest more and more money by taking it from innocent customers' different types of bank accounts (FD, OD, etc).' ICICI Bank's audit team exposed this scam Saini said: 'This scam that she used to run during her employment (2020-2023) was brought to our notice by the ICICI Bank branch manager who in turn was informed by the bank's internal audit team. Although we arrested her, but we believe such a small age girl could not have managed to conduct this scam alone, there must be other accomplices. We are still investigating. We have traced all the affected bank customers and found most of them were senior citizens who are not so tech savvy and merely invested in FDs and other banking products.' An ICICI Bank spokesperson said, 'The interest of our customers are of paramount importance to us. Immediately upon discovering the fraudulent activity, we filed an FIR with the police. We have a zero-tolerance policy against any fraudulent activity and thus suspended the employee involved. We would like to reassure that genuine claims of impacted customers have been settled.'
Time of India
29-05-2025
- Business
- Time of India
When will salaried employees get Form 16 to file income tax return for FY 2024-25 (AY 2025-26)?
Many salaried employees are waiting to receive Form 16, a TDS Certificate, from their employer. Form 16 is an important TDS certificate that contains details of the salary income paid to the employee during the financial year, tax regime opted for tax deduction at source, and deductions and exemptions that the employee has claimed from the salary income (depending on the tax regime). The certificate, of course, contains details of the TDS from the salary, which is one of the main reasons it is needed for filing one's Income Tax Return (ITR). ET Wealth Online tells you when you can expect to get Form 16, what to check in it, and what to do if you do not get it. Is there a last date for employers to issue Form 16 to salaried employees? According to income tax rules, employers must file their e-TDS return for the January-March quarter of a financial year, latest by May 31 of the next FY. Once the e-TDS return is filed, the tax deductor is required to issue the TDS certificate within 15 days of filing the eTDS return, i.e. latest by June 15. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like ¿Artritis? Especialista le pide a los colombianos que hagan esto antes de dormir Alivio del dolor Mirar Ahora Undo Also Read: ITR filing deadline extended to September 15, 2025, for FY 2024-25 (AY 2025-26) Shubham Jain, Associate Director, Nangia Andersen India - a tax consulting firm, says, "Form 16 is a certificate of tax deducted at source by the employer on behalf of the employee. In cases where an employer deducts tax at source on salaries, it is mandatory to issue Form 16 by June 15. Failure to issue Form 16 in a timely manner attracts a penalty of Rs 500 per day for each day of default. The maximum penalty can be up to the amount of TDS deducted by the employer. The employer is required to deposit the penalty amount directly into the credit of the Central Government. The penalty is a cost to the employer but not really available for claim by the employee." Live Events Can you file ITR without Form 16? Filing income tax return with Form 16 is easier. However, a taxpayer can file income tax return without having Form 16. If you do not have Form 16, then you must collect and rely on other documents for information/proof such as salary slips, Annual Information Statement (AIS) and Form 26AS to file income tax return. Can you download Form 16 from the Income Tax Department's website using PAN? A salaried employee cannot download Form 16 from the Income Tax Department's website, either by using his/her PAN or the deductor's PAN. Only the deductor can issue Form 16 to the employee or the deductee. The deductor can also issue the Form 16 only after downloading it from the TRACES portal. To put it simply, Form 16 of all employees of a single employer is generated from and only after the e-TDS return is filed by the employer. This is because the information in the Form 16 is sourced from the e-TDS return filed by the employer. Also Read: Can you claim LTA tax exemption in new tax regime? Who will get Form 16 from their employer? An employer will issue Form 16 to its employee if the former has deducted tax on the salary income paid to the employee. As per the income tax rules applicable for FY 2024-25 (between April 1, 2024, and March 31, 2025), zero tax is payable under the new tax regime if taxable income does not exceed Rs 7 lakh. Similarly, if the taxable income does not exceed Rs 5 lakh, then no tax will be deducted by the employer if the employee has opted for the old tax regime for FY 2024-25. Hence, depending on your net taxable salary and tax regime chosen by you, if there is no tax deducted by the employer, then it may not issue Form 16 to you. Jain says, "Form 16 is a certificate showing TDS deducted by the employer; accordingly, in case no tax is required to be deducted because of low salary, issuance of Form 16 by the employer is also not mandatory. Thus, though legally not required, an employer may still choose to issue a NIL TDS Form 16 to the employee." What to check in Form 16 and other TDS certificates An employee should check certain things in the Form 16 received. There are two parts of Form 16 - Part A and Part B. Part A of Form 16 contains details of the employee and employer, such as name, address, PAN, TAN, etc., and tax deducted in the four quarters of the financial year. Part B of Form 16 contains details of the total income paid by the employer to the employee during the financial year. It also contains the tax regime opted for, deducting tax on salary during the financial year, deductions and exemptions that are claimed, as per the tax regime. Both parts of Form 16 will have the TRACES logo if they have been downloaded from that site, which is a legal requirement. What is the password to open Form 16? Form 16 is usually, but not always, a password-protected file. The password can be your PAN (in lower or uppercase), your date of birth (DD/MM/YY), or a combination of PAN (lower or uppercase) and date of birth. You should check your email to see if Form 16 is password protected and what the password is. Can you have two Form 16s for a single financial year? Yes, a salaried employee can have two or more Form 16s in a single financial year. This will happen if you have switched jobs during the relevant financial year. In such a case, each employer would issue you a separate Form 16 for the time period that you worked with that employer.
Economic Times
15-05-2025
- Business
- Economic Times
9 changes in ITR-1, ITR-2, ITR-3, ITR-4 you need to know for FY 2024-25 (AY 2025-26) income tax return filing
The Income Tax Department has notified the income tax return forms for FY 2024-25 (AY 2025-26), incorporating the changes in tax laws announced in the July 2024 budget. However, taxpayers will have to wait for the release of the ITR filing e-utilities on the income tax portal to file their ITR. ET Wealth Online explains the nine changes made in this year's ITR forms that will make your ITR filing process easier for FY 2024-25 (AY 2025-26). Changes in ITR forms for FY 2024-25 (AY 2025-26) 1. Expansion of eligibility to file ITR 1 and ITR 4: This year, the Income Tax Department has expanded the eligibility by relaxing the eligibility criteria, making more taxpayers eligible to file their tax return using ITR 1 and ITR 4. The new rules allow even taxpayers with long-term capital gains from equity and equity mutual funds to file a tax return using ITR1 and ITR 4 (as applicable), provided the capital gains do not exceed Rs 1.25 lakh. Naveen Wadhwa, Vice-President of Research and Advisory at Taxmann, says, "The Budget 2024 increased the LTCG exemption limit on listed equity and equity mutual funds from Rs 1 lakh to Rs 1.25 lakh. In previous years' ITR forms, even if a taxpayer's LTCG under Section 112A was within the exemption limit and there was no tax payable, the presence of capital gains income made them ineligible to file the simpler ITR-1 forms. Instead, they were required to file the return in ITR-2 or ITR-3 forms, which are more complex and time-consuming. This resulted in a genuine hardship for small taxpayers. To address this, the Central Board of Direct Taxes (CBDT) has notified that taxpayers are eligible for filing ITR-1 and ITR 4, even if they have LTCG under Section 112A, provided the total LTCG does not exceed Rs 1.25 lakh and there is no brought forward or carry forward capital loss. This move eases the compliance burden and simplifies return filing for small taxpayers with limited capital gains with no losses to be brought forward." ITR1 and ITR 4 notified by the tax department: Check the major changes here 2. Aadhaar enrolment ID not acceptable: One of the quiet changes made in Budget 2024 was removal of the acceptance of the Aadhaar enrolment ID for the PAN application, and also at the time of filing the ITR. Post this amendment, PAN applications and ITRs can no longer be filed using Aadhaar enrolment ID instead of the actual Aadhaar number. This year's income tax return forms (ITR 1, ITR 2, ITR 3 and ITR 5) have been amended to remove the column to enter the Aadhaar enrolment ID. Wadhwa says, "The ITR forms for FY 2024-25 (AY 2025-26) do not have the Aadhaar Enrolment ID column this year. If the taxpayers do not have an Aadhaar number, then they will not be able to file ITR this year." 3. Opting out of new tax regime by small business owners: Taxpayers having business income cannot switch/choose tax regimes every financial year, unlike individuals who don't have business income. As per the income tax rules, taxpayers having business income have once in a lifetime option to switch from the old to the new tax regime. However, this switching requires submission of a form to the tax department. Wadhwa says, "The previous year ITR-4 simply asked whether the taxpayer had opted out of the new tax regime. If yes, then the taxpayer was required to provide the date and acknowledgement number of Form 10-IEA if applicable. However, the ITR-4 for FY 2024-25 (AY 2025-26) has introduced a more detailed disclosure. It now seeks confirmation of past filings of Form 10-IEA and asks whether the taxpayer wants to continue opting out of the new Tax Regime in the current year." 4. Mention TDS section in ITR form: This year's income tax return forms (ITR 1, ITR 2, ITR 3 and ITR 5) require taxpayers to mention the TDS section under which tax was deducted from the income earned in FY 2024-25. Wadhwa says, "The requirement to mention the TDS section in the ITR form is applicable if tax is deducted on income other than salary. Earlier, there was no requirement to mention the TDS section in the ITR form while claiming the tax credit. However, from this year, a taxpayer must mention the section under which the benefit of TDS credit is being taken." 5. New capital gains rules incorporated in ITR forms: Budget 2024 announced new capital gains rules, effective July 23, 2024. Hence, if you have made capital gains by selling listed or unlisted shares, equity mutual funds, houses, land, or any other capital asset, then the date of sale is important to calculate the correct capital gains amount and the appropriate tax on it. Wadhwa says, "Taxpayers should check the date of sale and transfer of the capital asset to know whether the tax will be calculated based on the old rules or new rules. If the transfer date is before July 23, 2024, the old tax provisions will continue to apply, including the 15% tax rate on STCG covered under Section 111A, the 20% tax rate on LTCG covered under Section 112 with indexation benefit, and the 10% tax rate on LTCG under Section 112A. However, if the transfer occurs on or after 23rd July 2024, new tax provisions will apply. The ITR form requires a disclosure of the date of transfer, separate reporting for transfers made before and on or after 23rd July 2024, and the proper application of revised tax rates and indexation rules."If you have capital gains, then income from them will be reported in ITR 2, ITR 3 and ITR 5, as applicable. 6. Separate reporting for capital gains from unlisted bonds and debentures: Budget 2024 changed the taxation rules for unlisted bonds and debentures. The new rules are effective July 23, 2024. Wadhwa says, "According to the new rules, if unlisted debentures or bonds were issued on or before July 22, 2024, but redeemed, matured, or transferred on or after 23rd July 2024, the entire gain will be taxed as short-term capital gains, regardless of the holding period. As per the new rules, the gains will be taxed at the income tax slab rates applicable to your income. However, if the maturity, redemption or transfer occurs before July 23, 2024, the resulting gain will be classified as long-term and taxable according to the old provision. Under the old rules, the capital gains will be taxed at 20% with indexation benefit."The reporting of capital gains from unlisted bonds and debentures has to be done in ITR-2, ITR-3 or ITR-5, as applicable. 7. Reporting of buy-back proceeds as deemed dividends: From October 1, 2024, the amount received on the buy-back of shares by domestic listed companies will be considered as deemed dividends in the hands of shareholders. The new rule was announced in Budget 2024. Wadhwa says, "ITR-2, 3 and 5 have been amended so that shareholders can report the buy-back proceeds as dividend income under the section 'Income from other sources'. Under the capital gains schedule, the taxpayers will be required to report zero as sale proceeds so that the cost of acquiring shares results in a capital loss. This capital loss can be brought forward and set off against other long-term capital gains for the next eight assessment years." 8. Providing disability certificates for deduction under Section 80DD and 80U: Under the old tax regime, a taxpayer could claim a deduction under Section 80DD or Section 80U for expenditure made for disabled individuals. This year, a taxpayer claiming any of the deduction is required to provide acknowledgement number of the disability certificate as well. Wadhwa says, "Till previous years, a taxpayer could claim a deduction under Section 80DD or Section 80U by quoting the Form 10-IA as per income tax rules. However, from this year, taxpayer is also required to provide acknowledgement number of disability certificates along with Form 10-IA to claim deduction."Section 80DD can be claimed by a resident individual or HUF who incurs medical expenditure or pays an insurance premium for the care of a dependent family member with a disability or severe deduction under Section 80U is available to a resident individual who is himself suffering from a disability or severe says, "This reporting requirement is applicable only if ITR-2 and ITR-3 is filed. There is no reporting requirement if the taxpayer files ITR-1." 9. Asset reporting applicable if total income exceeds Rs 1 crore: There is good news for taxpayers having income above Rs 50 lakh. From this year, a taxpayer is required to report their assets and liabilities only if the gross total income exceeds Rs 1 crore. Wadhwa says, "Earlier, a taxpayer was required to report their assets and liabilities if their gross total income exceeded Rs 50 lakh in a financial year. However, from this year, the reporting in Schedule AL will be mandatory only if gross total income exceeds Rs 1 crore."The reporting in Schedule AL can be done in the ITR 2 and ITR 3.
Time of India
13-05-2025
- Business
- Time of India
9 changes in ITR-1, ITR-2, ITR-3, ITR-4 you need to know for FY 2024-25 (AY 2025-26) income tax return filing
The Income Tax Department has notified the income tax return forms for FY 2024-25 (AY 2025-26), incorporating the changes in tax laws announced in the July 2024 budget. However, taxpayers will have to wait for the release of the ITR filing e-utilities on the income tax portal to file their ITR. #Operation Sindoor The damage done at Pak bases as India strikes to avenge Pahalgam Why Pakistan pleaded to end hostilities Kashmir's Pahalgam sparks Karachi's nightmare ET Wealth Online explains the nine changes made in this year's ITR forms that will make your ITR filing process easier for FY 2024-25 (AY 2025-26). Changes in ITR forms for FY 2024-25 (AY 2025-26) 1. Expansion of eligibility to file ITR 1 and ITR 4: This year, the Income Tax Department has expanded the eligibility by relaxing the eligibility criteria, making more taxpayers eligible to file their tax return using ITR 1 and ITR 4. The new rules allow even taxpayers with long-term capital gains from equity and equity mutual funds to file a tax return using ITR1 and ITR 4 (as applicable), provided the capital gains do not exceed Rs 1.25 lakh. Naveen Wadhwa, Vice-President of Research and Advisory at Taxmann, says, "The Budget 2024 increased the LTCG exemption limit on listed equity and equity mutual funds from Rs 1 lakh to Rs 1.25 lakh. In previous years' ITR forms, even if a taxpayer's LTCG under Section 112A was within the exemption limit and there was no tax payable, the presence of capital gains income made them ineligible to file the simpler ITR-1 forms. Instead, they were required to file the return in ITR-2 or ITR-3 forms, which are more complex and time-consuming. This resulted in a genuine hardship for small taxpayers. To address this, the Central Board of Direct Taxes (CBDT) has notified that taxpayers are eligible for filing ITR-1 and ITR 4, even if they have LTCG under Section 112A, provided the total LTCG does not exceed Rs 1.25 lakh and there is no brought forward or carry forward capital loss. This move eases the compliance burden and simplifies return filing for small taxpayers with limited capital gains with no losses to be brought forward." Live Events ITR1 and ITR 4 notified by the tax department: Check the major changes here 2. Aadhaar enrolment ID not acceptable: One of the quiet changes made in Budget 2024 was removal of the acceptance of the Aadhaar enrolment ID for the PAN application, and also at the time of filing the ITR. Post this amendment, PAN applications and ITRs can no longer be filed using Aadhaar enrolment ID instead of the actual Aadhaar number. This year's income tax return forms (ITR 1, ITR 2, ITR 3 and ITR 5) have been amended to remove the column to enter the Aadhaar enrolment ID. Wadhwa says, "The ITR forms for FY 2024-25 (AY 2025-26) do not have the Aadhaar Enrolment ID column this year. If the taxpayers do not have an Aadhaar number, then they will not be able to file ITR this year." 3. Opting out of new tax regime by small business owners: Taxpayers having business income cannot switch/choose tax regimes every financial year, unlike individuals who don't have business income. As per the income tax rules, taxpayers having business income have once in a lifetime option to switch from the old to the new tax regime. However, this switching requires submission of a form to the tax department. Wadhwa says, "The previous year ITR-4 simply asked whether the taxpayer had opted out of the new tax regime. If yes, then the taxpayer was required to provide the date and acknowledgement number of Form 10-IEA if applicable. However, the ITR-4 for FY 2024-25 (AY 2025-26) has introduced a more detailed disclosure. It now seeks confirmation of past filings of Form 10-IEA and asks whether the taxpayer wants to continue opting out of the new Tax Regime in the current year." 4. Mention TDS section in ITR form: This year's income tax return forms (ITR 1, ITR 2, ITR 3 and ITR 5) require taxpayers to mention the TDS section under which tax was deducted from the income earned in FY 2024-25. Wadhwa says, "The requirement to mention the TDS section in the ITR form is applicable if tax is deducted on income other than salary. Earlier, there was no requirement to mention the TDS section in the ITR form while claiming the tax credit. However, from this year, a taxpayer must mention the section under which the benefit of TDS credit is being taken." 5. New capital gains rules incorporated in ITR forms: Budget 2024 announced new capital gains rules, effective July 23, 2024. Hence, if you have made capital gains by selling listed or unlisted shares, equity mutual funds, houses, land, or any other capital asset, then the date of sale is important to calculate the correct capital gains amount and the appropriate tax on it. Wadhwa says, "Taxpayers should check the date of sale and transfer of the capital asset to know whether the tax will be calculated based on the old rules or new rules. If the transfer date is before July 23, 2024, the old tax provisions will continue to apply, including the 15% tax rate on STCG covered under Section 111A, the 20% tax rate on LTCG covered under Section 112 with indexation benefit, and the 10% tax rate on LTCG under Section 112A. However, if the transfer occurs on or after 23rd July 2024, new tax provisions will apply. The ITR form requires a disclosure of the date of transfer, separate reporting for transfers made before and on or after 23rd July 2024, and the proper application of revised tax rates and indexation rules." If you have capital gains, then income from them will be reported in ITR 2, ITR 3 and ITR 5, as applicable. 6. Separate reporting for capital gains from unlisted bonds and debentures: Budget 2024 changed the taxation rules for unlisted bonds and debentures. The new rules are effective July 23, 2024. Wadhwa says, "According to the new rules, if unlisted debentures or bonds were issued on or before July 22, 2024, but redeemed, matured, or transferred on or after 23rd July 2024, the entire gain will be taxed as short-term capital gains, regardless of the holding period. As per the new rules, the gains will be taxed at the income tax slab rates applicable to your income. However, if the maturity, redemption or transfer occurs before July 23, 2024, the resulting gain will be classified as long-term and taxable according to the old provision. Under the old rules, the capital gains will be taxed at 20% with indexation benefit." The reporting of capital gains from unlisted bonds and debentures has to be done in ITR-2, ITR-3 or ITR-5, as applicable. 7. Reporting of buy-back proceeds as deemed dividends: From October 1, 2024, the amount received on the buy-back of shares by domestic listed companies will be considered as deemed dividends in the hands of shareholders. The new rule was announced in Budget 2024. Wadhwa says, "ITR-2, 3 and 5 have been amended so that shareholders can report the buy-back proceeds as dividend income under the section 'Income from other sources'. Under the capital gains schedule, the taxpayers will be required to report zero as sale proceeds so that the cost of acquiring shares results in a capital loss. This capital loss can be brought forward and set off against other long-term capital gains for the next eight assessment years." 8. Providing disability certificates for deduction under Section 80DD and 80U: Under the old tax regime, a taxpayer could claim a deduction under Section 80DD or Section 80U for expenditure made for disabled individuals. This year, a taxpayer claiming any of the deduction is required to provide acknowledgement number of the disability certificate as well. Wadhwa says, "Till previous years, a taxpayer could claim a deduction under Section 80DD or Section 80U by quoting the Form 10-IA as per income tax rules. However, from this year, taxpayer is also required to provide acknowledgement number of disability certificates along with Form 10-IA to claim deduction." Section 80DD can be claimed by a resident individual or HUF who incurs medical expenditure or pays an insurance premium for the care of a dependent family member with a disability or severe disability. The deduction under Section 80U is available to a resident individual who is himself suffering from a disability or severe disability. Wadhwa says, "This reporting requirement is applicable only if ITR-2 and ITR-3 is filed. There is no reporting requirement if the taxpayer files ITR-1." 9. Asset reporting applicable if total income exceeds Rs 1 crore: There is good news for taxpayers having income above Rs 50 lakh. From this year, a taxpayer is required to report their assets and liabilities only if the gross total income exceeds Rs 1 crore. Wadhwa says, "Earlier, a taxpayer was required to report their assets and liabilities if their gross total income exceeded Rs 50 lakh in a financial year. However, from this year, the reporting in Schedule AL will be mandatory only if gross total income exceeds Rs 1 crore." The reporting in Schedule AL can be done in the ITR 2 and ITR 3.
Time of India
24-04-2025
- Business
- Time of India
Going for premature withdrawal of fixed deposit? Know which type of bank FD minimises loss on interest and penalty
When a financial urgency arises, we usually have to break our savings to meet the emergency. The easiest option is to withdraw money prematurely from a fixed deposit . However, not many FD investors are aware of the two methods by which banks usually calculate the penalty if the money from the FD is withdrawn before the maturity date. Income Tax Guide Income Tax Slabs FY 2025-26 Income Tax Calculator 2025 New Income Tax Bill 2025 ET Wealth Online decodes the two methods of calculating the premature withdrawal FD penalty. Which penalty method is beneficial for FD investors? Method 1: FD interest rate is reduced by a certain percentage One of the most common methods of levying a penalty on premature withdrawal of an FD is the reduction of the interest rate by a certain percentage. For instance, your bank may give you 1% less on the FD interest rate if you go for a premature withdrawal from your FD. 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Nu Image Medical Shop Now Undo Adhil Shetty, CEO of says, "Reduction in applicable FD interest rate by a certain percentage as per the bank's rule is one of the common methods to levy a penalty on premature withdrawal from FD. Usually, 1% or 0.50% is levied as a penalty on premature withdrawal from an FD by the banks. Suppose you have booked an FD for 18 months at 7.25%. However, due to some emergency, you break your FD after one year. The FD interest rate for one year, at the time of booking the FD, was 7%. The penalty applicable is 1%. Hence, the bank will pay you 6% interest at the time of breaking the FD before maturity." Also Read: This bank is offering 8.55% to senior citizens on fixed deposits Live Events Method 2: A penalty is levied on the total amount Some banks use another method of calculating the penalty at the time of premature withdrawal of the FD. Here, instead of levying a penalty on the interest rate, the penalty is levied on the total amount. Shetty says, "Under this method, the bank first calculates the total accrued amount on the date the FD is being broken. The total accrued amount includes principal and interest. A certain percentage is levied as a penalty on the total accrued amount, and the balance is paid to the FD holder. Suppose you decide to break your FD before maturity. The bank levies 1% as a penalty on the total accrued amount. On the date, FD is being prematurely withdrawn, the total accrued amount is, say, Rs 50,000. The bank will levy a penalty of 1% on this amount, i.e., Rs 500 as a penalty. The balance amount will be paid to the investor." Which saves more money for the FD investors? Raj Khosla, Founder & MD, says, "Premature withdrawal penalties are levied to discourage investors from hasty termination of fixed deposits. A penalty only on the interest ensures a lower deduction, as there will be a marginal drop in the resultant return. On the contrary, a similar penalty levied on the principal and accrued interest will see a higher penalty amount." Also Read: 4 banks that are still offering special FDs with high interest rate Let us understand this by taking an example. Suppose you book an FD of Rs 1 lakh at 7% per annum for five years. Here we have taken two scenarios: a) Premature withdrawal happens before 6 months, and b) premature withdrawal happens after three years. Premature withdrawal of FD happens before 6 months Suppose the premature withdrawal of a five-year FD happens before 6 months of completion, say in the 5th month. Penalty on applicable interest: According to the first method, the bank will first check the effective interest for 5 months of the FD on the date when the FD investment was made. Suppose this is 5% for a 5-month FD. A penal interest of 1% is applicable on the effective interest rate. Here, the bank will calculate the interest payable to you at 4% (5%-1%) on the principal amount. Usually, banks do not offer compounding benefits on short-term FD tenure of 180 days or 6 months. In such a case, the FD payable amount is calculated on a simple interest basis. Here, it is assumed that the bank calculates the amount on a simple interest basis. On the premature withdrawal of FD, the bank will pay you Rs 1,01,667. Penalty on the total accrued amount: In the second method, the bank calculates the total accrued amount on the date the FD is prematurely withdrawn. Due to the FD's short-term nature, the bank will also calculate the accrued amount using simple interest. Remember, the total amount is calculated using the original contracted interest rate, 7% in this case. Suppose the accrued amount is Rs 1,02,917. The bank applies a 1% penalty to this accrued amount, which comes out to Rs 1,029 (1% of Rs 1,02,917). This will be deducted from the total accrued amount of Rs 1,02,917, and the balance of Rs 1,01,888 will be paid to the FD investor. In the first method, the individual loses Rs 221 as compared to the second method. Revised Rate Revised Tenor (Months) Penalty Net Maturity Value PW in 5 months; 1% interest loss 4% 5 ₹ 1,01,667 PW in 5 months; same rate; 1% penalty on P+I 7% 5 ₹ 1,029 ₹ 1,01,888 PW in 37 months; 1% interest loss 5.5% 37 ₹ 1,18,344 PW in 37 months; same rate; 1% penalty on P+I 7% 37 ₹ 1,239 ₹ 1,22,620 Premature withdrawal of FD happens after 3 years In the second scenario, suppose the premature withdrawal of the FD happens after three years, say in 37 months. Here, the compounding benefit will be applicable in both methods as the tenure of the FD is more than 6 months, i.e., 37 months. Penalty applicable to interest rate: Here, too, the bank will first check the effective interest rate for 37 months of FD on the date the FD was booked. Suppose this is 6.5% for 37 months. A penal interest of 1% is applicable on the effective interest rate. Here, the bank will calculate the interest payable to you at 5.5% (6.5%-1%) on the principal amount. With an effective interest rate of 5.5%, the premature withdrawal is Rs 1,18,344, which will be paid to the FD investor. Penalty on the total accrued amount: Here, the bank will calculate the total accrued amount on the date the FD is being prematurely withdrawn. The total accrued amount will be calculated on the original contracted rate, 7% in our example. The bank will also offer a compounding benefit as the FD has been held for 37 months. Suppose the accrued amount is Rs 1,23,858. The bank will apply a 1% penalty on this accrued amount, which is Rs 1,239. This will be deducted from Rs 1,23,858, and the balance of Rs 1,22,620 will be paid to the FD investor. Here, the individual loses Rs 4,275 in the first method. As the tenure of FDs held before premature withdrawal increases, the penal calculation on the total accrued amount helps investors save more money compared to the penalty levied on the interest rate. What you should do as an FD investor As an FD investor, it is important for you to read the bank's terms and conditions while making an investment. The terms and conditions will help you understand how banks will calculate a penalty in case of premature withdrawal. Khosla says, "The penalty on premature withdrawals could be higher for fixed deposits booked for longer tenures, while the penalty could be a few basis points lower for shorter tenures. Hence, check the terms and conditions while booking the FD." However, the penalty could exceed 1% as well in certain cases. Khosla explains this with an example. For instance, the interest rate on a 1-year FD is 7.5% and the interest rate on a 6-month FD is 7% at the time of booking the FD. The interest will see a 150 basis point plunge if you're prematurely withdrawing an FD after 6 months. Therefore, the interest amount will be calculated at 6% (7%-1% penalty) for 6 months. At times, banks may waive off premature withdrawal penalties in exceptional cases. Khosla says, "For instance, some banks don't levy a penalty on premature withdrawals on the FD if the gross proceeds are reinvested in a new fixed deposit. Banks, at their own discretion, can also waive off premature withdrawal penalties for senior and super senior citizens." You should also check whether the FD you booked with the highest interest rate is callable or non-callable. Shetty says, "Premature withdrawal is applicable only to callable FDs. These deposits do not carry a lock-in period, offering flexibility in terms of access. On the other hand, non-callable FDs do not permit early withdrawal before the specified lock-in period. However, there are certain exceptions. According to Reserve Bank of India (RBI) guidelines, depositors may withdraw funds from non-callable FDs under exceptional circumstances such as bankruptcy, a court order, business liquidation, or in the event of the depositor's death. However, the penalty imposed for prematurely withdrawing a non-callable Fixed Deposit can be considerably higher."
