@varunagrawal , despite your fixed deposit account being in a foreign country ( India ), the interest earnings recognition ( and pay taxes on ) and that of "early withdrawal" penalty is the same as if the financial entity were a US based one. Thus when you recognize the interest earned in 2021, you also tell TurboTax that there was early withdrawal penalty. This will be offset against the earnings and in a sense you will be "whole".
Note that since the interest was paid out monthly, you will need to use dollar of the day exchange rate to convert to US$-- ditto for the early withdrawal penalty.
Does that help? Is there more I can do for you ?
pk
