Many of us know that PPF tenure is 15 years. But we don’t know PPF withdrawal rules and options available after 15 years of maturity. Let us discuss on this aspect in today’s post.
I purposely not covered this topic of PPF withdrawal rules in my last post “Public Provident Fund -20 unknown facts“. Because I felt this PPF withdrawal rules and options need a separate post.
We all know that PPF period is 15 years. But in reality, it is more than 15 years. I tried to explain the same with below image.
You notice that if you opened the account on say 10th August, 2015 then it will not mature on 1oth August, 2030 (15 years), but on 1st April, 2031. Because the 15 years count starts from 1st April, 2016. Hope this concept is clear now.
Once the PPF account matures, then you have three options. Many feel that once the PPF account completes 15 years tenure then it is over. However, you have three options left. I tried to explain the same from below image.
1) Closing of PPF account after the maturity or completion of 15 years-
This option is known to all. We open an account, contribute till 15 years completion and finally close and withdraw the whole amount with interest. Even banks and post office share this option alone when you enquire about PPF feature. Therefore, I may say this as a universal option to the majority of PPF investors.
For example, if you open the account on 10th August, 2015, then your account mature on 1st April, 2031. You simply withdraw the amount invested and interest on that fully. Account closes there itself. If you want to invest freshly again after the closure of this account, then you have to open new PPF account.
Do you know this? After maturity, you can withdraw the amount in installment too. But you can’t opt this option for more than a year. Means, if your account matured on 1st April, 2016, then you can withdraw the amount in installments up to 31st March, 2017.
If your PPF account matured but you not closed means you will continue to earn the interest as long as you keep it. However, no further contribution will be allowed to such accounts. Also, you will not be allowed to open new account unless you close the existing account. After the wait of a year, the account will automatically extended for a block of 5 years (without contribution option).
2) Extend PPF account without further contribution–
This is the default option. Let us say your account matured on 1st April, 2016 and you neither closed the account nor applied to extend the account for a block of 5 years WITH CONTRIBUTION, then this option will be automatically activated. Do remember that the application to extend the account with a contribution for a block of 5 years must be submitted within one year from the date of maturity. Otherwise, this option will be selected automatically.
This default option will be for a block of 5 years. This means, if you not withdrawn the amount nor applied to extend with a contribution, then the account will continue for 5 years. For example, account maturing on 1st April, 2016 will mature on 1st April, 2021. After that if not closed account nor applied to extend the account without contribution, then again for another 5 years, an account will be extended. There is no limit to it. You continue to enjoy earning interest on the balance available in such account. But you are not allowed to contribute any fresh amount in such account. Neither you are allowed to change the option after a year of first maturity of account.
The best feature of this option is, there is no limit to withdraw the balance during this period. You are eligible to withdraw whatever the amount available in your account at any point of time without any restriction. The balance amount will continue to earn. However, this option can be exercised only once in a year.
3) Extend PPF account with further contribution-Once account mature, then you have to submit the application form called
Once account mature, then you have to submit the application form called Form H to either post office or bank where you have PPF account. Do remember that, you must submit the application before the completion of 1 year from the date of maturity. For example, if account matured on 1st April, 2016, then you must exercise this option within 31st March, 2017. Otherwise, the second option mentioned above will be activated by default. Once you submit the form, then the account will further extended for a block of 5 years.
If you not opted this option but continued to contribute as usual, then such deposit amount neither earn any interest not eligible for Sec.80C tax benefit. To regularize it, you have to write it to the Ministry of Finance, (DEA) NS Branch through the Accounts Office for regularizing the account which was continued by him without giving the option.
Once you opted this option, then you can’t go back to 2nd option mentioned above. Few want to go back to 2nd option of above, mainly because of liquidity available there. Because in this option, you will not feel so free for withdrawing the balance as in case of 2nd option.
In this option, you will be allowed to withdraw 60% of the balance at the beginning of each extended period (block of five years) is permitted. It means, let us say the account matured on 1st April, 2016 and the available balance is Rs.1 Cr. Then, you are allowed to withdraw 60% of this Rs.1 Cr during the block period of 5 years i.e. Rs.60 lakh. You can withdraw Rs.20 lakh in 1st year extension, Rs.10 lakh in the second year and Rs.5 lakh in the third year and so on until 5 years extension matures. The overall limit in above example is Rs.60 lakh , this can be withdrawn either in a single withdrawal or in installment in each year.
This rule applies to next block of 5 years extension again.
Note that, for the first block of 5 years extension if you opted the 3rd option, then in next 5 years block period, you can opt the 2nd option without submitting the Form H. So you are free to chose the option after every such extension.
Hope this will bring you clarity on PPF withdrawal rules & options after 15 years maturity.
Read our other posts related to PPF