Public Provident Fund: The Public Provident Fund (PPF) is popular because of its attractive interest rates and tax benefits, especially for small savers. You can deposit as little as Rs 500 or up to Rs 1.5 lakh annually in a PPF account.
PPF provides tax exemption under section 80C of the Income Tax Act, and its returns are not taxable, making it a superior investment option compared to many others. Moreover, you can opt for a Loan Against PPF, which provides loans against your PPF balance at a competitive interest rate during financial emergencies.
While your PPF account is active, you have the flexibility to borrow money against it or make partial withdrawals, despite its 15-year lock-in period. However, once it reaches maturity, what options are available?
You have three alternatives to proceed once your PPF account matures, a) Close the account and withdraw the entire proceeds.
b) Extend the account without making fresh deposits.
c) Extend the account with fresh deposits.
1. Close the account and withdraw entire proceeds
You can only close a PPF account after 15 years from the end of the year in which you first subscribed to it. Once your account matures, you can withdraw the entire corpus.
To do this, you need to submit a fully filled Form C at the bank branch or post office where your PPF account is held. After processing, the corpus will be credited to your bank account, and the PPF account will be closed. In some banks, Form 2 is used instead of Form C.
2. Extend the account without fresh deposits
After your PPF account matures, you have the option to extend it in five-year intervals indefinitely. During this extended period, you aren’t required to make new deposits, but you can still make partial withdrawals, subject to certain conditions. However, additional contributions won’t be accepted. The balance will continue to earn interest for the next five years. You’re allowed to make one partial withdrawal per fiscal year during this time. Any amount in the balance can be withdrawn once per fiscal year by the subscriber. It’s important to note that if you continue the account without deposits for more than a year, you cannot opt to resume contributions for a subsequent five-year block.
3. Extend the account with fresh deposits
To continue using your PPF account and make new contributions after the end of the maturity period, you must notify the Account Office before the year ends by completing Form H. If you continue to deposit without submitting this form, any further deposits will be considered irregular, and no interest will be paid on them. Additionally, deposits made into PPF accounts after the 15-year window without choosing to keep the account open will not qualify for the tax benefits provided by Section 80C of the Income Tax Act.
Partial withdrawals during extension period
If you choose to extend your PPF account without contributing, you can withdraw any amount from your balance once per fiscal year, while still earning interest on the remaining balance.
On the other hand, if you decide to extend the account with a contribution, you’re allowed only one partial withdrawal during the extension period. To do this, you need to submit a Form C application. However, there’s a condition: the total withdrawals made during the five-year block period cannot exceed 60% of the credit balance at the beginning of the extended period.
You have flexibility in how you withdraw this amount—you can take it all at once in one year or spread it out over several years to suit your needs. Similarly, during the subsequent five-year block period, you can withdraw up to 60% of the total amount at credit at the beginning of that period, but no more than once per year. This withdrawal limit applies at the start of each five-year block extension.