PPF withdrawal, loan, pre-mature account closure rules
Public Provident Fund is one of the most popular secure savings schemes in India. The saving scheme comes with a 15-year lock-in period. One can invest up to Rs 1.5 lakh per financial year and save the same amount of income tax under section 80c. Returns from PPF are also completely tax-free. The Government-sponsored scheme gains its popularity due to its interest rate, capital security, and tax-free nature.
The current interest rate on a Public Provident Fund Account is 7.1% per annum with annual compounding. The interest rate is not fixed as Government revises it every quarter. The interest is gets credited on the 31st of March every year.
Although PPF is a 15-year lock-in scheme, one can withdraw or take a loan with some conditions. The maximum premature withdrawal amount can be 50% of the account holder's contribution. The scheme also allows premature closure of an account with some strict criteria. Let's cover the rules you need to maintain in order to make a partial withdrawal or taking a loan from your PPF account.
PPF withdrawal - After Maturity
Public Provident Fund account gets matured in 15 years. You can withdraw the entire corpus and close the account permanently after the completion of 15 years. However, there is an option to extend the maturity with or without further deposit by five years of interval.
PPF Withdrawal Rules on Extension
The maturity of a PPF account is allowed to extend by five years of interval. That means if you wish, you can continue your PPF account for the next five years.
You need to submit an account extension form before the initial maturity of 15 years. Once you apply for a maturity extension, your account will be extended by blocks of 5 years for a lifetime unless you close your account.
You are allowed to withdraw funds not exceeding 60% of the corpus from your PPF account once a year after the extension. For example, assume that you have a 50 lakh balance during the extension period, then you can withdraw only one time in a financial year with a maximum of 60% (30 lakh) of the entire corpus. However, you can also close your account anytime during the extension period.
PPF Withdrawal Rules without Extension
Public Provident Fund account matures in 15 years. During its maturity period, you are welcome to close your PPF account by submitting an account closure form.
If you don't opt for account closure on initial maturity, your PPF account will continue to fetch applicable interest on your account. In this case, you will not be allowed to make further deposits.
After completion of one year of initial maturity (15 years), your PPF account will automatically be extended for the next five years. You can continue further contributions to your PPF account during the extension period provided you have submitted form-H before the extension. If you fail to submit Form-H, your PPF account will be considered an irregular account. Hence, claiming 80c tax benefits will not be available for you.
Also, read: Invest in PPF - 8 reasons you should know about
PPF withdrawal - Before Maturity
Although Public Provident Fund has a 15-year locking period, it allows premature withdrawals with some strict conditions. There's another advantage of having a PPF account is you can take loans in an emergency. The process of taking a loan from a PPF account is simple and less time-consuming. Let's talk about premature withdrawal and loan taking process one by one:
Premature Closure
PPF allows premature closure of the account only after the completion of 5 years. Here are the situations when a PPF account holder or his/ her family member can apply for premature account closure:
- In case of life-threatening disease of the account holder, spouse, or children, the account holder can close his/ her PPF account.
- Fund required for the higher education of children
- In case of the Death of the account holder, the account will automatically be closed.
Partial Withdrawal
On completion of the initial five years, one can withdraw some amount of funds from his/ her PPF account. The withdrawn amount is also exempt from tax. Here is the list of conditions for partial withdrawal from a Public Provident Fund account:
- Partial withdrawal is allowed only after the completion of 5 years of a PPF account.
- One can withdraw upto 50% of the corpus
- Only one withdrawal is allowed in a financial year.
Processes of taking a partial withdrawal
An individual has to submit Form-C in order to withdraw funds from a PPF account to his/ her bank along with a PPF passbook. If the account owner has a savings account in the same bank, he/ she can expect direct credit of the fund into the savings account. Unless the bank may provide Demand Draft (Banker's Cheque) for the same.
Taxability on PPF and Its Withdrawals
The Public Provident Fund is categorized under EEE (Exempt-Exempt-Exempt). The scheme offers an income tax deduction of up to Rs. 1.5 lakh under section 80C Income Tax Act. With this deduction, the entire-tax is made exempt. Interest earned on maturity is also exempt from tax. Withdrawals from PPF, whether partial or complete withdrawal, are exempt from tax under the 80C income tax act.
Loan against Public Provident Fund (PPF)
Instead of partial withdrawal, one can opt loan against a PPF account. This option is convenient and ideal for an emergency. Here are the rules for taking loans against a PPF account:
- A PPF account holder is eligible for a loan between the third and sixth financial year from the account opening.
- A loan against PPF is not applicable if the age of the account exceeds six years.
- The loan amount is allowed at a maximum of 25 percent of the preceding two-year PPF balance at the time of loan application.
- The applicable rate of interest of the loan against PPF is 2% extra than the actual interest rate of the PPF scheme.
- In the case of failure of repayment of a loan, an additional 6% interest as a penalty will be applicable.
- More than one loan is not allowed in the Public Provident Fund (PPF) scheme at a time.
- Only one loan is allowed in a financial year.
- The second loan is allowed only after repaying the first loan.
Check Eligible PPF Loan and Withdrawal Limit SBI Online
You can certainly check eligible loan amount or partial withdrawal amount online if you have SBI net-banking facility. Here are the steps:
- Visit SBI NetBanking Portal and log in using your credentials
- Next, Go to the 'Request & Enquiries' section from the main menu
- Click on the 'Eligible loan/withdrawal limit on PPF' option to check your loan/ withdrawal eligibility
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FAQs
Can one have more than one PPF accounts?
No, An individual can open only one PPF account.
Can I continue PPF after 15 years?
You can continue PPF After 15 years in blocks of 5 years.
Can I open a new PPF account after maturity?
No, an individual can have one PPF account. However, you can extend the tenure as long as you want.