Learn the rules like a pro so that you can break them like an artist! That’s what the famous Spanish painter Pablo Picasso had to say.
But we’re all about being the good guys and following the rules.
Rules and responsibilities are the ties that bind us. We do what we do because of who we are. If we did otherwise, we would not be ourselves.
This is what we live by! And now that we’re already on the subject of rules, it would be great if you get some knowledge on PPF account rules, PPF withdrawal rules, PPF account withdrawal rules and everything related to PPF. Because though some rules are meant to be broken, these aren’t, believe us! Unless you want some roadblocks with your hard-earned money and some financial issues in your life.
So, let’s dive straight into PPF withdrawal rules and everything you should know to make your pension and retirement journey smooth like butter.
- Because it combines safety, returns, and tax savings, the PPF account, or Public Provident Fund programme, is one of the most popular long-term saving-cum-investment solutions.
- The National Savings Institute of the Finance Ministry initially offered the PPF to the public in 1968.
- You can invest a minimum of Rs. 500 and a maximum of Rs. 1,50,000 annually.
- A PPF account holder can withdraw the entire account amount only when the scheme reaches maturity after 15 years.
- From the seventh year of account inception, partial PPF withdrawals are permitted in the event of a financial emergency.
What is PPF?
The Public Provident Fund (PPF) was established in India in 1968 to mobilise small deposits through investment and earn a return. It’s also known as a savings-cum-tax saving investment instrument since it allows you to save on annual taxes while building a retirement fund.
A PPF account is a safe investment option for anyone wishing to save taxes and earn some handsome assured profits. The Public Provident Fund (PPF) scheme is a long-term investment option that pays a competitive interest rate and returns. The interest and refunds earned are not subject to income tax. This programme requires opening a PPF account, with the amount contributed during the year being claimed under section 80C deductions.
PPFs have a 15-year maturity period, after which you can opt to remove funds from your account. Partial withdrawals are permitted before the account matures (after the sixth financial year from the date of account opening), but only under particular conditions.
So, it’s best to know about PPF withdrawals, including partial and complete withdrawals and premature account closure and extension after maturity. Because it’s a long-term commitment, you definitely don’t want to regret your decision later.
Importance and Benefits of a PPF Account
You can open a PPF account at any Post Office or any nationalised bank. Even private banks are now authorised to provide this service.
So, when something is so mainstream and such a popular option amongst people, don’t you think you should also be in the loop about its importance and be aware of the PPF withdrawal rules? Here we are to help increase your knowledge.
- For those with a minimal risk appetite, a PPF account is one of the best investment options.
- The PPF is a government-backed scheme with no market-linked investment. As a result, it provides assured returns to many people’s investing demands.
- PPF accounts are employed as a diversification tool for an investor’s portfolio because the returns are fixed. Additionally, they provide tax advantages.
Another critical thing to note, besides the importance of PPF withdrawal rules and its pros, is the tax benefits that you enjoy when investing in PPF.
The Exempt-Exempt-Exempt (EEE) category includes a variety of investment vehicles, including the PPF. In other words, all PPF contributions are tax-deductible under Section 80C of the Internal Revenue Code. However, the maximum contribution to the PPF in a single financial year cannot exceed Rs.1.5 lakh. Furthermore, the accumulated sum and interest are tax-free at the moment of withdrawal. A PPF account cannot be closed before it reaches its maturity date.
However, keep in mind that you cannot close a PPF account early. Only in the event of the account holder’s death can the nominee request that the account be closed.
PPF Withdrawal Rules
Now that you have a clear understanding of the basics of a PPF account and its importance and benefits, it’d be a great addition to your knowledge to know the PPF withdrawal rules.
Because you can make partial withdrawals from your PPF account, the regulations may not be as rigid as you believe. The revised PPF withdrawal rules and guidelines for 2021 have made things a little easier, but they remain mostly unchanged.
Generally, the PPF account balance can only be fully withdrawn at maturity after 15 years. After the completion of the tenure of 15 years, your entire balance in the PPF account, including earned interest, can be withdrawn freely and the account can be closed.
If account holders require funds sooner than 15 years, the system allows partial withdrawals beginning in year 7 or after completing 6 years.
Premature withdrawals are permitted up to 50% of the balance in the account after the fourth year (preceding the year in which the amount is withdrawn or at the end of the preceding year, whichever is lower). Furthermore, withdrawals are limited to one each fiscal year.
So, if you wish to take money out of your PPF account or close it before the 15 years are over, let’s look at the partial withdrawal restrictions.
After the End of the Tenure
The revised PPF withdrawal guidelines for 2021 keep the partial withdrawal rule in place after 15 years. After the end of the financial year in which the initial contribution was made, the 15-year period is considered. The maturity date would be April 1 2026, if you made the initial deposit on June 15, 2010. You can stay in the plan for another five years without making any new payments and make partial withdrawals if you want to.
Completion of 7 Years
You can take up to 50% of the amount in your PPF account after seven years, starting from the end of the year you made your initial contribution, according to PPF partial withdrawal guidelines. Each year, you can only make one partial withdrawal. You must bring your PPF passbook and an application to the bank/post office to withdraw funds. Income tax is not due on the amount withdrawn. In the PPF withdrawal rules 2021, this is also unaltered. The sum would be the lesser of these two, according to PPF Account withdrawal rules: 50% of the account balance at the end of the fiscal year or 50% of the account balance at the end of the fourth fiscal year preceding the year of your application.
In some circumstances, you may be able to close your PPF account before the 15-year period has passed. For example, seeking treatment for a life-threatening condition that the account holder or their dependents are suffering from or paying for higher education. The PPF withdrawal regulations 2021 have included another circumstance in which a PPF account can be liquidated prematurely: when the account holder’s residency status changes.
The loans that can be taken out against the amount in the account have changed under the PPF exit regulations 2021. Under the old PPF withdrawal terms, you may borrow money from your PPF account starting in the third financial year after making your initial deposit and paying an interest rate 2% higher than the PPF rate. Under the PPF withdrawal guidelines, 2021 has decreased this to 1%. The maximum loan amount will be 25% of the sum at the end of the two years prior to the year in which you apply. If the account holder dies, the nominee/legal heirs are responsible for paying the interest on any unpaid loans. This could be adjusted on account closure.
You must complete Form C, which is accessible at the bank or post office, to withdraw funds from your PPF account. You must fill out the form with the account number and amount you wish to withdraw, sign it, and place a revenue stamp on it. Following that, you must submit it along with your passbook. You can request a demand draught or have the approved amount credited directly to your savings account.
Did You Know?
A post office PPF account requires a minimum deposit of Rs. 100. Defaulters who do not maintain a minimum balance of Rs. 500 in any financial year may be subject to a Rs. 50 penalty.
PPF Withdrawal Rules on Extension
PPF Withdrawal After Extension Without Contribution
You can only withdraw an amount up to the balance in the account at the time of the extension after you’ve prolonged it for a block of five years. In addition, each year, just one withdrawal is permitted.
PPF Withdrawal After Extension with Contribution
You can only withdraw 60% of the sum accumulated at the time of extension over the new 5-year period after the account has been extended with contributions. You are also limited to one withdrawal each year.
Word to Remember
Section 80 C
Taxpayers love Section 80C because it lowers their taxable income by making tax-saving investments or incurring eligible costs. It permits the taxpayer to deduct up to Rs 1.5 lakh from their total income.
Before we part ways, let us leave you with the good bits. When thinking about hopping onto the PPF way, some benefits that you should acquaint yourself with are:
• Returns are risk-free because they are not affected by market volatility.
• Interest rate compounded.
• Section 80C of the Income Tax Act of 1961 allows for a tax deduction.
• This is a 15-year investment.
• Advances and loans against your PPF balance.
• The minimum investment is Rs.500.
• On maturity, the PPF account has an unlimited extension facility in five-year blocks.
• From the sixth financial year onwards, a partial withdrawal facility is available.
Now that you know all about PPF and PPF withdrawal rules, you can withdraw money whenever the need arises. So, get going and fulfil your investment and retirement goals today.
Yes, after the 15-year maturity term has passed, you may continue to invest in PPF for a maximum of 5 years. You must apply for a PPF extension, either with or without contributions, to do so.
Form C can be used to make a partial withdrawal from the PPF. You must also provide your passbook and affix a revenue stamp to the form at the time of submission. You must complete two areas of the form: basic information and acknowledgement.
There is no limit to the number of times you can extend the account’s term as long as you do it in five-year increments. However, you can only extend the tenure after each block has reached maturity.
PPF accounts cannot be opened by NRIs. Accounts opened by NRIs before they became NRIs, on the other hand, can be kept open till maturity. NRIs must withdraw the whole PPF account and close it when it reaches maturity. They are not eligible to extend their PPF account.
Yes, you can close your PPF account before the maturity period finishes, but only in particular situations. Premature termination of a PPF account is only conceivable after 5 years (of continuous contributions) have passed since the account was started. Only in the following situations may the premature closing of a PPF account be considered:
If the account holder, their spouse, or a dependent child suffers from a life-threatening illness
If the account holder or their children require funds for further education
If your residency status changes