Interest Rate Comparison

• Compare the interest rate of your existing FD with current rates offered by banks.
• Reinvest only if the new rate is significantly higher than the old one.
• Check if promotional or senior citizen rates are available during reinvestment.
• Ensure the compounding frequency of the new FD is the same or better.
• Understand if reinvestment will improve your financial returns over time.

Premature Withdrawal Penalty

• Confirm if any penalty applies for breaking the FD before maturity.
• Most banks reduce the interest rate and deduct a penalty margin.
• Estimate the actual payout after the penalty is applied.
• Check if the remaining tenure would yield more than a new FD.
• Avoid breaking the FD if the loss outweighs the benefit of reinvestment.

Liquidity and Financial Need

• Assess if the withdrawal is due to a genuine financial need.
• Consider a loan against FD as an alternative to breaking it.
• Ensure that reinvested funds won’t be required soon.
• Choose the new tenure based on your cash flow and future plans.
• Keep a portion of your funds in savings for emergencies.

Tax Implications

• Interest earned on the FD is fully taxable in your income bracket.
• Breaking an FD may cause early or additional tax liability.
• TDS will be applied on accrued interest above prescribed limits.
• Reinvesting does not give tax relief unless it’s a tax-saving FD.
• Maintain records of both FDs for accurate income reporting.

Bank Terms and Conditions

• Read the terms related to auto-renewal, nomination, and withdrawal.
• Review the new FD’s features like interest payout mode and digital access.
• Confirm the maturity date and reinvestment confirmation receipt.
• Use bank calculators to estimate maturity amount before reinvesting.
• Contact the bank for assistance if unsure about process or options.