You may minimise your tax liability in every way possible by opening a PPF Account, a long-term savings plan. As a result, it is not simple to terminate this account. Withdrawals from PPF accounts and closing them are subject to specific government regulations.
After a PPF account matures, it may often be closed. This account will eventually reach its maximum balance in 15 years. Therefore, you cannot have your account closed for up to 15 years. There are, however, situations in which an early closure is acceptable. It would help if you also didn’t worry about closing your Pension plan after 15 years. The game may continue with fewer restrictions.
A Maturity-Based Extension of the PPF
When your PPF account matures, you may either withdraw the entire corpus or extend the life of the account by any number of 5-year increments. The account will be automatically renewed if you do not take your funds and shut the account. Interest is accrued on the account balance for an additional period.
PPF Contribution-Free Extinction
This implies that after your PPF account has reached maturity, you will keep it open but will not be able to add any new funds to it. Your whole corpus will accrue interest until you cash it out in full.
Contribution-Based PPF Expansion
Even after the PPF account has matured, you may keep it open and contribute further. However, you may only do so if you have completed Form H to prolong the PPF account before the account’s original maturity date plus one year. You will not be able to make any further payments into your PPF account if you don’t fill out and submit Form H. Any such payments will be considered non-recurring and will not be eligible for interest or the Section 80C tax deduction.
When Your PPF Account Expires (SBI and Others)
After 15 years, the money in a PPF account is considered “mature” and may be withdrawn in full. After you have removed the maximum amount from your PPF account, it will be closed. Banks like SBI and ICICI, as well as others, are subject to this regulation. The 15-year mark begins at the close of the fiscal year in which the account was first created. For example, if you started your Pension plan in October 2018, it would be fully invested on March 31, 2034. The 15-year period would begin on March 31, 2019, as This would be the final day of the 2018-2019 fiscal year. Please be aware that the term will be calculated based on the preceding fiscal year if you started your PPF account before April 5.
Complete Withdrawal and Closure of Account
Simple steps need to be taken. When your PF account is ready for withdrawal, all you have to do is visit the bank. You will need to submit your withdrawal request no later than the anniversary of the maturity date. To request a withdrawal from the PPF, you must submit Form C. Your PPF account information is required for this application. Could you put it in your PPF passbook? The passbook must be returned at the same time as the form. The money would be deposited into your savings account within a week after submitting your application.
Failure to Avoid Early Termination of PPF Account
Prematurely, before the 15-year term, you may now cancel your PF account. It was impossible in the past. At this time, however, the government has given the green light for an early shutdown. However, the public does not have access to this centre. So instead, you withdrew because of a valid excuse. These justifications are official government policy. Also, this early termination is subject to specific circumstances.
NRIs can Close Their PPF Accounts
We are aware that Micro Savings Schemes are restricted to citizens and permanent residents of India. As for the PF, the same rule applies. Thus, a PF account cannot be opened by a non-resident Indian. However, what if the PF account was established before the individual became an NRI? So read this carefully and keep these things in mind.
Accidental Dissolution Of PPF Account
Only after five fiscal years have passed since the PPF account was created may it be closed prematurely. There are just three exceptions:
- Critical illness or fatal disease affecting the account holder, their spouse, or their minor children
- Higher education expenses for the account holders or their children: Proof of enrolment at an accredited university is required.
- The account holder’s country of residence has changed (becoming an NRI)
- Any interest accrued within that time will be reduced by 1% as a penalty. So if your PF account has accrued 8% interest each year for the last five years, the annual rate will be lowered to 7% starting in the sixth year.
Contributions to a Personal Retirement Account (PPF) May be Deducted Tax-Free
- Withdrawals from a PPF are not subject to any taxes. However, both full and partial withdrawals before maturity are affected.
- The tax consequences of PPF are described as “Exempt, Exempt, Exempt” (or “EEE” for short).
- The Income Tax Act’s Section 80C provides a tax break for investments of up to Rs.1.5 million.
- All three of these amounts—the initial investment, interest, and maturity are not subject to taxation.
- With a maximum annual contribution of Rs.1.5 lakh, the whole amount is tax deductible if the account user has not made some other investments that exceed the limits of Section 80C.
Closing Your PPF Account
To cancel your account, you may do so without submitting any paperwork. Your PPF account will automatically terminate when a certain amount of time has passed without any activity. To sum up, the PF withdrawal form may also be considered the PPF bank closing form. Keep in mind that it will remain open until you remove the whole balance of your PF account.
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