In case of premature closure of the PPF account, There are some changes and conditions as far as premature PPF Withdrawal. Read on to learn about them.
Introduction
A 15-year lock-in period is included in the Public Provident Fund (PPF) scheme, which means that only after the completion of this duration can you make contributions to the account and withdraw the interest earned. You can choose to withdraw money prematurely or close the account prematurely, depending on the situation. This is important information to keep in mind regarding PPF Withdrawal. In this blog, we will discuss all PPF withdrawal and the recent changes in case of premature closure of the PPF account
What is PPF?
For investors who wish to establish a long-term retirement fund, Public Provident Fund (PPF) is a preferred investment choice. PPF is a desirable investment option because of its low risk, moderate yields, and additional tax advantages.
The additional tax benefits offered by PPF, subject to the investment cap of ₹1,50,000, make it appear better than other types of investments. PPF has an assured return rate of 7.1% and performs on par with nominal returns paid by bank fixed deposits (FDs). Furthermore, PPF deposits are safer than financial instruments like FDs because they are government-guaranteed.
PPF currently offers an interest rate of 7.1%.
Changes Done in PPF Regarding Premature Withdrawal
Changes in case of premature closure of the PPF account are as follows,
- Under the PPF Scheme, 2019, a special form, Form 5, has been introduced for pre-mature withdrawal purposes. Earlier, premature PPF closure was only allowed due to serious illnesses or life-threatening conditions affecting the account holder, spouse, dependent children, or parents.
- The PPF Scheme 2019 now includes higher education for the PPF account holder or his or her dependent children.
- Now, the actual rate of interest that the account provided is deducted by 1% as a penalty. For instance, if the person was earning an interest of 7.1% on the contributions that are being made, the rate of interest would be reduced to 6.1% in the event that the PPF account was closed prematurely.
- In addition, the PPF Scheme 2019 authorizes early closure of the PPF scheme after five years have passed in the case that the account holder’s resident status changes. The provision that lowers the interest rate on early withdrawal by 1% will remain in effect.
| Type of PPF withdrawal | Duration | Grounds | An amount that can be withdrawn |
|
After 15 years | No criteria | The total sum plus accrued interest |
|
After 5 years | For education or medical treatment | The full amount |
|
After 15 years | No criteria | Up to 50% of the balance that is available |
Reasons for Premature PPF Withdrawal
A PPF account can be prematurely closed in certain circumstances as long as it has been open for five years. If the money is needed for the treatment of a life-threatening illness of the account holder, their spouse, their dependent children, or their parents, a PPF account holder can request the early closure of their account or the account of the minor for whom they are the guardian.
Supporting documentation must be sent with this request. On the provision of documentation confirming acceptance to a higher education institution in India or overseas, premature closure is also permitted if that sum is needed for the account holder’s or the minor account holder’s higher education. The following are some guidelines regarding premature withdrawal:
- Due to an Automatic Extension – You can extend your PPF account by 1 or more blocks once you’ve reached the 15-year mark since it was opened. Five years are divided into each block. If you don’t take any PPF money out or close the account, it will be automatically renewed. But the amount that has accrued in the account as a whole will earn interest.
- Simple Extension –You will be able to withdraw the amount that was in the PPF account at the time of maturity if the account is extended. A financial year is limited to one withdrawal.
- Extension of PPF Account via Contributions – The scheme permits the PPF account to be extended via contributions. You are able to contribute to the PPF account by extending it, and interest will be produced on such contributions as well.
PPF Withdrawal on Maturity
The Public Provident Fund (PPF) is a government-backed savings scheme that offers attractive interest rates and tax benefits. PPF accounts have a maturity period of 15 years. However, account holders can extend their account in blocks five years after maturity.
To withdraw money from a PPF account on maturity, the account holder must submit a duly filled Form C at the bank branch or post office where they have their account. The PPF account will be terminated thereafter, and the corpus will be credited to the account holder’s bank account.
PPF Withdrawal Rules
- Partial PPF withdrawal Rules: Partial ppf withdrawals are allowed from PPF accounts after the completion of 5 years from the financial year in which the account was opened. However, the maximum amount that can be withdrawn is 50% of the balance at the end of the fourth year preceding the year of withdrawal or 50% of the balance at the end of the previous year, whichever is lower.
- Premature Closure: Premature closure of PPF accounts is allowed only in certain exceptional circumstances, such as life-threatening illness, higher education, or marriage of the account holder or their child. A penalty of 1% is charged on the amount withdrawn prematurely.
Partial/Premature PPF Withdrawal Process
To make a partial or premature withdrawal from a PPF account, the account holder must submit a duly filled Form A at the bank branch or post office where they have their account. The form must be accompanied by the following documents:
- PPF passbook
- Proof of identity
- Proof of address
- Reason for withdrawal (if applicable)
PPF Partial Withdrawal Process
To make a partial withdrawal from a PPF account, the account holder must follow the steps below:
- Fill out Form A and submit it to the bank branch or post office where you have your PPF account.
- Attach the required documents, such as your PPF passbook, proof of identity, proof of address, and reason for withdrawal (if applicable).
- Your request will be processed, and the amount will be credited to your bank account within a few days.
PPF Amount Withdrawal Process
If you want to take a full or partial withdrawal from your PPF, you must submit Form C to the appropriate bank or PPF post office. The three sections found in Form C are as follows:
-
Form C Declaration Section
You must include the PPF account number and the justification for the PPF withdrawal in this section. You must also provide information regarding how long the account has been open.
-
Bank Details Section
The information about the bank that needs to receive the money must be entered in this section. You can also fill out this section with information about the check or demand draft that is being issued.
-
Verification
Before processing the request for a PPF withdrawal, the bank or office will perform a thorough verification.
Premature Closure of PPF Account
To close a PPF account prematurely, the account holder must follow the steps below:
- Fill out Form A and submit it to the bank branch or post office where you have your PPF account.
- Attach the required documents, such as your PPF passbook, proof of identity, proof of address, and reason for PPF withdrawal (if applicable).
- You will be charged a penalty of 1% on the amount withdrawn prematurely.
- Your account will be closed, and the corpus will be credited to your bank account within a few days.
Conclusion
We hope that after reading the information provided above, you have understood more about the changes in case of premature closure of PPF account.
Withdrawals from PPF accounts are subject to very stringent rules and procedures. It is crucial to understand this withdrawal process, tax implications, early withdrawal penalties, loan facility, and PPF account context.
After five years have passed since the subscription year’s end, a person may withdraw up to 50% of the PPF account amount. Retractions are tax-free.
If you’re a working professional, figuring out PPF returns can occasionally be a hassle. To get this issue resolved, get in touch with Vakilsearch. With decades of experience, their professionals can help you with any legal matter.
FAQs
What is the penalty for premature PPF closure?
A penalty of 1% is charged on the amount withdrawn prematurely from a PPF account. The penalty is calculated on the balance at the end of the previous year.
What is premature closing of PPF form?
Form C is used to close a PPF account prematurely. The form can be downloaded from the website of the bank or post office where the account is held.
Is PPF premature withdrawal taxable?
No, PPF premature withdrawal is not taxable.
Is partial withdrawal allowed in PPF?
Yes, partial withdrawal is allowed in PPF after the completion of 5 years from the financial year in which the account was opened. However, the maximum amount that can be withdrawn is 50% of the balance at the end of the fourth year preceding the year of withdrawal or 50% of the balance at the end of the previous year, whichever is lower.
Can I withdraw PPF before 5 years?
No, you cannot withdraw PPF before 5 years.
What happens if I discontinue PPF?
If you discontinue your PPF account, you will not be able to make any further contributions or withdrawals. Your account will remain dormant and you will continue to earn interest on the balance. However, you will not be eligible for the tax benefits.
Can I get a loan against my PPF account?
Yes, you can get a loan against your PPF account after the completion of 3 years from the financial year in which the account was opened. The maximum loan amount that can be borrowed is 25% of the balance at the end of the previous year.
What is the minimum tenure of PPF account?
The minimum tenure of a PPF account is 15 years. However, you can extend your account in blocks of 5 years after maturity.
What is the lock down period for PPF?
The lock down period for PPF is 5 years. This means that you cannot make any withdrawals from your PPF account before the completion of 5 years from the financial year in which the account was opened.
What are the rules for premature withdrawal of PPF announced?
The premature ppf withdrawal rules are as follows: Partial withdrawal: Partial withdrawal is allowed after the completion of 5 years from the financial year in which the account was opened. The maximum amount that can be withdrawn is 50% of the balance at the end of the fourth year preceding the year of withdrawal or 50% of the balance at the end of the previous year, whichever is lower. Premature Closure: Premature closure is allowed only in certain exceptional circumstances, such as life-threatening illness, higher education, or marriage of the account holder or their child. A penalty of 1% is charged on the amount withdrawn prematurely.
How can I withdraw my premature PPF amount?
To withdraw your premature PPF amount, you must submit a duly filled Form C at the bank branch or post office where you have your account. The form must be accompanied by the required documents, such as your PPF passbook, proof of identity, proof of address, and reason for withdrawal (if applicable).
Can I withdraw PPF for buying home?
Yes, you can withdraw PPF for buying a home. However, the withdrawal must be made after the completion of 5 years from the financial year in which the account was opened.
What is the partial PPF withdrawal rules in 2023?
The partial PPF withdrawal rules in 2023 are the same as the previous year.. You can make a partial withdrawal after the completion of 5 years from the financial year in which the account was opened. The maximum amount that can be withdrawn is 50% of the balance at the end of the fourth year preceding the year of withdrawal or 50% of the balance at the end of the previous year, whichever is lower.
Can I withdraw my PPF online?
No, you cannot withdraw your PPF online. You must visit the bank branch or post office where you have your account to withdraw money.
