The public provident fund (PPF) is a central government’s social security scheme for citizens, where they can invest for their retirement savings. It has a maturity of 15 years, after which the full PPF withdrawal is allowed. However, under certain circumstances, the retirement corpus can also be withdrawn prematurely.
The PPF, which is part of small savings schemes, currently offers an interest rate of 7.1 per cent per annum. The rate is reviewed on a quarterly basis. An investor can invest as low as Rs 500 and up to a maximum of Rs 1,50,000 per annum under the scheme.
The scheme has an original duration of 15 years. Thereafter, on application by the subscriber, it can be extended for one or more blocks of five years each. Loans and withdrawals are also permitted depending upon the age of the account and balances as on the specified dates. Income tax benefits can also be availed for investing under the scheme. It is a risk-free investment as the PPF is supported by the central government.
The original duration of 15 years is also its maturity period, after which the money can be withdrawn. However, if certain terms and conditions are met, the invested amount can be withdrawn prematurely after at least 5 years. Here’s detail on premature closure, partial withdrawal, and withdrawal on maturity:
Withdrawal On Maturity
PPF account matures after a period of 15 years. On maturity, the entire corpus can be withdrawn. One can open a PPF account with a bank branch or post office. At the time of withdrawal, Form C is filled and submitted with the entity where the PPF account is opened — bank or post office. Thereafter, the PPF account is closed and the invested amount with returns is credit to the bank account.
Partial Withdrawal
Partial withdrawal is allowed after the completion of at least six years of the PPF account. In this case, only 50 per cent of the corpus is allowed to be withdrawn. The rest of the corpus remains in the PPF account. Partial withdrawals from PPF can be made from the 6th financial year after the account is opened. On partial withdrawals of the PPF account, no tax is levied. And, only one partial withdrawal is allowed per financial year. For this also, Form C is submitted at the bank or post office wherever the PPF account is opened.
Premature Closure
Premature closure is allowed under certain conditions and only after at least five years of the PPF account are complete. Under this, the full corpus can be withdrawn on the grounds of education and health. The specific conditions include life-threatening ailments or serious diseases faced by account holders, spouses or children; and children’s or account holder’s higher education.
In this case, 1 per cent less interest is paid to the account holder as a penalty for premature closure. It means that the current interest rate on the PPF is 7.1 per cent. But, in case an account is closed prematurely after five years, 6.1 per cent will be paid to him/ her.
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