The Buyt Desk
Public Provident Fund (PPF) is a 15-year long-term investment plan. But there are rules to withdrawing your PPF account prematurely. Only when you satisfy the conditions, you can withdraw a partial PPF amount before the maturity of the account.
PPF is a popular saving cum investment plan. It gives a fixed and assured return on your investment. By investing in it you can avail of tax deductions of up to Rs 1,50,000 under Section 80C of the Income Tax Act. It currently offers an interest rate of 7.1%, which is much higher than the bank fixed deposits. It is a high-yielding small-saving scheme in India.PPF is popular among investors with a low-risk profile as it is risk-free and gives a high return on investment. PPF account has a locking period of 15 years and then you can keep extending it twice for a block of 5 years. The minimum amount you can deposit is Rs 500 and a maximum of Rs 1,50,000 per fiscal year. PPF is an Exempt-Exempt-Exempt (EEE) vehicle as the invested amount, the interest received and the total funds collected by the time of maturity are all tax-free. Only after a locking period of 15 years, you can withdraw the entire PPF funds. But after the sixth fiscal year, you can opt for partial withdrawals and in case of emergencies, premature account closure is possible after five financial years. You should also know that you can avail loan against your PPF and need not prematurely withdraw or close your account. Either you opt to partially withdraw, completely withdraw or do premature closure, you have to follow a few sets of rules. Let us see in detail the terms and conditions.
Rules for PPF premature withdrawal
You can prematurely withdraw from the PPF account only when the account is active and has been completed five years from the date of opening the account. Complete withdrawal is possible only after 15 years. This implies that the premature withdrawal is always partial withdrawal until maturity. Only one withdrawal is allowed per year. The withdrawal amount also has a limit and that is either 50 % of the balance at the end of the 4th year or 50 % of the balance at the end of the preceding year, whichever is lower. No fees or taxes are charged for premature withdrawal.
When can you close PPF prematurely?
PPF accounts can be closed prematurely when there is a death of the account holder or a change in residential address of the account holder or for treating either life partner or dependent of the account holder’s life-threatening disease or for the higher education of the account holder or his /her children.
When you close a PPF account prematurely, you will get a 1 % lesser PPF interest rate on your investment for all the years to date. And premature PPF account closure is possible only after five financial years from the day of opening the account except when there is a death of the account holder.
How to withdraw the PPF amount?
When you either want to withdraw the PPF amount partially or completely, you must fill and submit Form C to the institution that has your PPF account. If the account holder is a minor, the minor must be alive and his /her details must be submitted. Thorough verification is done by the bank or office before processing the withdrawal request. There are three sections in Form C and they are –
Declaration section – Fill in details of the PPF account like account number, number of years, date of opening and more. Also, state the reason for the withdrawal.
The office use section – Date and the signature of the person in charge. Have details like withdrawal amount, Balance amount, Last withdrawal date, and Account opening date.
Bank details section – Fill in bank details where the amount needs to be credited. After the cheque or demand draft is issued fill in those details too.
Summing up
PPF withdrawal rule states that a PPF account holder can opt to partially withdraw, completely withdraw or close the account subject to achieving certain terms and conditions given the PPF account is five financial years old.
