The Public Provident Fund or PPF is a government backed, high yielding, small savings scheme meant to create long term wealth for investors post retirement. Introduced in 1968 by the Ministry of Finance, PPF currently has an interest rate of 7.1 per cent. This Centre backed scheme is a form of a small savings policy and ensures to provide assured returns at the time of its maturity, which makes it so popular among investors.
Public Provident Fund is a flexible scheme in terms of how much investment the account holder wants to make. Individuals are allowed to invest as low as Rs 500 per year into their accounts, and also as high as Rs 1,50,000 per year. PPF investors are also eligible for interest on interest, which yields more returns. It is a 100 per cent risk free investment as the fund is backed by the Government of India, and it does not move in line with stock exchange rates that tend to change from day to day.
The maturity time in case of Public Provident Fund is 15 years. However, an account holder can close his or her account before the maturity period. According to the PPF withdrawal rules, any account holder can close the account given that specific terms and conditions have been fulfilled. This only applies when the account has completed five complete financial years. Read on to find details about all the rules on PPF withdrawal, withdrawal before maturity and premature closure.
PPF withdrawal rules
To facilitate complete withdrawal of PPF money, one has to close his or her account at the end of the 15th year by submitting Form C to the post office or bank. However, if one does not want to close the account, he or she can keep it active without contributing. In this case, the interest will keep adding on the balance till the account is closed. The account holder can withdraw any amount of money once per financial year.
If the account holder wants to keep the account active with contributions, he or she can apply for an extension in five-year blocks. This can be done as many time as one wants.
PPF withdrawal before maturity
A PPF account holder is eligible to withdraw his or her money only when the account is there for five years. For example, if one started an account in February 2020, he or she will be able to withdraw money in the financial year 2025-26. However, all the amount cannot be withdrawn from the PPF account.
One can either take out 50 per cent of the balance at the end of the fourth financial year or 50 per cent of the balance at the end of the preceding year. This depends on whichever amount is lower.
Premature closure of PPF account
An account holder can opt to close his or her PPF account prematurely under certain circumstances. This can be done when five years have already elapsed since the account was opened. PPF accounts can be closed if the account holder, his or her parents, spouse or dependent children are suffering from a terminal disease. Another ground is when the account holder wants to use the funds for higher studies. However, in case of both, relevant documents need to be furnished in order to prematurely close the account.
If the account holder’s residency status has changed, he or she can prematurely close the account. To attest change in this ground, one has to furnish copies of his or her passport, visa or Income Tax Return.
In all these cases, if the account holder closes his or her PPF account prematurely, one per cent lower rate of interest will be provided than the prevailing rates.
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