Fixed deposits (FDs) are a favored investment for risk-averse individuals, offering guaranteed returns. However, withdrawing funds before maturity can lead to penalties ranging from 0.5% to 1% below the contracted interest rate, significantly reducing the expected payout. For instance, if a five-year FD at 7% is withdrawn after one year, the interest is recalculated based on the prevailing one-year rate, further diminished by penalties. This early withdrawal can derail financial plans, particularly for long-term goals like property purchases or education funding, as it reduces total returns and may force investors to seek costlier financing options. Additionally, the interest earned is added to taxable income, potentially increasing tax liabilities, and triggering a Tax Deducted at Source (TDS) recalculation. Some FDs offer ancillary benefits like insurance, which may be lost upon early withdrawal. To avoid these penalties, investors might consider alternatives such as overdraft facilities, allowing them to access up to 90% of their deposit's principal while keeping the investment intact.