The Public Provident Fund ( PPF ) is a government-backed savings scheme that offers attractive interest rates and tax benefits , making it a popular long-term investment option for Indian citizens. Currently, the PPF offers an interest rate of 7.1% per annum. The scheme has a 15-year maturity period, but what if you need to access your funds earlier? Can you withdraw money before the 15 years are up? And what happens if you want to close your PPF account prematurely? Here’s what you need to know.
Partial Withdrawal : Available from the Sixth Year
If you find yourself in need of funds before the 15-year term is complete, PPF allows partial withdrawals starting from the sixth financial year. For example, if you opened your PPF account on February 1, 2020, you would be eligible to make a partial withdrawal from the financial year 2025-26 onwards. You can withdraw up to 50% of the balance at the end of the fourth year or the preceding year, whichever is lower.
Account Closure Before 15 Years: When Is It Allowed?
If you wish to close your PPF account before it matures, you can do so under specific conditions, provided your account has been active for at least five years. However, a 1% interest penalty will be applied, meaning you will receive 1% less than the prevailing interest rate for the duration your account was active. Premature closure is permitted in the following circumstances:
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1. Medical Emergency : If you or a family member needs funds for medical treatment, you can either make a partial withdrawal or close the account after five years.
2. Higher Education: For the higher education of your children, you can close the account or make a partial withdrawal after five years, provided you submit proof such as fee receipts and admission documents.
3. Relocating Abroad: If you or the account holder is moving abroad, the PPF account can be closed, and the entire amount withdrawn.
4. Death of the Account Holder: In the unfortunate event of the account holder’s death, the account can be closed before maturity without adhering to the 5-year rule. The nominee or legal heir can withdraw the balance.
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How to Close a PPF Account Prematurely
To initiate the premature closure of your PPF account, you need to submit a written application to the bank branch where the account is held. The application must state the reason for closure and be accompanied by relevant documents. For medical emergencies, a certificate from a medical authority is required; for educational purposes, fee receipts and proof of admission are needed; and in the event of death, the death certificate must be provided. After the bank verifies the documents, your application will be processed, and the account will be closed, with the penalty interest deducted from the final payout.
Understanding these rules can help you make informed decisions about managing your PPF account, ensuring that your investment continues to work in your best interest, even if unexpected circumstances arise.
