Public Provident Fund (PPF), a government validated and recognized investment scheme, is considered one of the best retirement-focused instruments. It has an initial lock-in period of 15 years and can reap huge benefits with the power of compounding.
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However, there are chances when investors may need to withdraw or close it prematurely.
In view of this, let's understand PPF withdrawal and closure rules in detail:
In PPF, premature closure is allowed after 5 years from the end of the year in which the account was opened subject to the following conditions –
(i) In case of life-threatening disease of the account holder, spouse or dependent children
(ii) In case of higher education of account holder or dependent children
(iii) In case of change of resident status of the account holder
1 percent interest is deducted from the date of the account opening while closing the account prematurely. For example, if an investor has earned interest of 7 percent per annum for five years on the PPF account, the interest for each year will be reduced to 6 percent.
Loan can be taken after the expiry of one year from the end of the year in which the initial subscription was made but before the expiry of five years from the end of the year in which the initial subscription was made, according to Post Office -- one of the issuers of PPF scheme.
Withdrawal can be taken after the expiry of five years from the end of the year in which the account was opened. An account holder can withdraw prematurely, up to a maximum of 50 percent of the amount that is in the account. Further, withdrawals can be made only once in a financial year.
For withdrawing PPF balance, investors are required to fill and submit Form C with the concerned branch of the bank where the PPF account lies.
Details such as account number, amount of money to be withdrawn, etc. are to be mentioned in the form. In case the account is in the name of the minor, there should be an additional declaration stating that the amount is required for the use of a minor child who is still a minor and is alive, according to Paisabazaar.
There is no tax on partial/premature withdrawals from the PPF account.
Disclaimer:
CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
First Published: Sept 7, 2020 2:04 PM IST
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