PPF Update: The Public Provident Fund is one of the most popular retirement savings plan, with lakhs of people investing in the scheme every year. The government-backed high yielding scheme can be accessed by almost everyone, with yearly contributions amounting to a minimum of Rs 500 and a maximum of Rs 1,50,000. PPF is also on of the very few tax-free schemes that comes under the government’s EEE (exempt, exempt, exempt) ambit. This means that your PPF contributions, interest earned and maturity amounts are exempt of tax under section 80C of the IT Act.
This government-backed scheme is a form of a small savings policy and ensures to provide assured returns at the time of its maturity, which makes it so loved among investors. PPF is currently offering an interest rate of 7.1 per cent per annum, compounded quarterly. This is one of the most highest rates of interest after EPF, which are available for risk-free savings. PPF account holders can also take a loan against their account at just 1 per cent interest per annum under certain conditions.
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The maturity period of PPF account is 15 years, but you can have access to your contributions and can also prematurely close your account subject to specific rules. Read on to find out the rules relating to premature withdrawal from PPF.
Here are 5 Rules to Know About PPF Premature Withdrawal
i. Premature withdrawal from PPF account is permitted only after five years of the account being opened and active. For example, if you open a PPF account in January 2022, you will be able to withdraw the money during the financial year 2027-28.
ii. You cannot withdraw all your money from your PPF account until the account matures after 15 years. This means premature withdrawal cannot be 100 per cent of your PPF account balance at any point.
iii. A subscriber can avail only one withdrawal during a financial after five years excluding year of account opening. This means if the account was account opened during 2020-21 the withdrawal can be done during or after 2026-27, as per India Post guidelines.
iv. Amount of withdrawal can be taken up to 50 per cent of balance at the credit at the end of fourth preceding year or at the end of preceding year, whichever is lower. This means withdrawal can be done in FY 2022-23, up to 50 per cent of balance as on March 31 2019 or March 31 2022, whichever is lower.
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v. As PPF is a tax-free scheme, you do not have to pay any taxes during premature withdrawal. There is also no charge in withdrawing from your PPF account prematurely.
PPF account can also be closed prematurely under specific conditions and after following a set of rules.