NEW DELHI : Providing a decent interest rate of 7.9%, tax savings on both principal and interest, and the safety of a government savings scheme, Public Provident Fund (PPF) is among the most popular small savings tool. You can invest a maximum of ₹1.5 lakh under Section 80C in your PPF account while a minimum investment of ₹500 is mandatory to keep the account alive.
Not just in post offices or the State Bank of India (SBI), you can open a PPF account even in some private sector banks.
Your PPF account matures at the end of the 15th year when you are allowed to withdraw the full amount or keep extending it further for a block of five years.
PPF withdrawal rules after 15 years
1) PPF scheme follows the financial year (April-March) as its accounting year. So if you opened a PPF account in March 2019, you are now already in the second year.
2) At the end of the 15th year you are free to close your PPF account and withdraw all your money. You have to fill up Form C and submit it to the post office or bank where you have the account.
3) You can chose not to close the PPF account but extend it further by a block of 5 years. This extension can be done for any number of times till the account holder is alive. You need to collect and submit Form H for extension of your PPF account.
PPF withdrawal rules before 15 years
1) The government allows you to partially withdraw some amount from your PPF account from the seventh financial year onwards. For the first six years of your PPF account, withdrawal is not allowed.
2) You can withdraw from your PPF account from the seventh financial year since the year of opening. However, only one withdrawal is allowed in one year.
3) The amount of money you can withdraw from the PF account has been capped. Amount of withdrawal is limited to 50% of the balance at the end of the fourth preceding year or 50% of the balance at the end of the immediate preceding year, whichever is lower.
4) Even your premature partial withdrawal is treated as tax free. The entire amount you withdraw enjoys tax free status.
5) Public Provident Fund withdrawal or pre-mature closure is not permissible except under special circumstances.
PPF loan rules
1) Since you are not allowed to partially withdraw your provident fund savings before the seventh year, you are free to take a loan against it from the third year to the sixth year.
2) The loan amount has been capped to 25% of the balance at the end of two preceding years.
3) You cannot take a fresh loan till the time your previous loan is cleared.
4) You have to pay an interest of 2% more than the prevailing rate of interest of PPF. For example, if you take a loan against your PPF balance, you have to pay 9.9% interest as the PPF account fetches an interest of 7.9%.
5) Loans have to cleared with 36 months.
6) No loan is allowed from the 7th year onwards but you can make partial withdrawals.