Do you hold a PPF Account? If yes, for 15 long years of carefully investing in the scheme and collecting the benefit of compounding, it is the right time for your PPF account to mature. It is known to all that PPF has a lock-in peroiod of 15 years you still have the option to make partial withdrawals during its tenure and also take a loan against it. But what would you do when it get matures? If you want to continue with your PPF Account then what will be the options?
Once your PPF account gets matured you can proceed in the following ways:
- You can close the account and withdraw entire proceeds
- You can extend the account without fresh deposits
- You can extend the account with fresh deposits
Closing the account and withdrawing entire proceeds:
On the expiry of 15 years from the end of the year in which the initial subscription was made into account, a PPF account can be closed. The maturity will not be determined by the date of opening the PPF account.
You will certainly have the option of extending your PPF account after it gets matured. In a block of five years you can indefinitely extend it. You don’t need to make fresh deposits and can even make partial payments during the extended period.
Extending the account without fresh deposits:
You don’t need to intimate with Account Officer for any extension as it will be automatically considered as extended in order to continue a PPF account. There will be no fresh contribution made thereafter. For the next 5 years the balance will keep earning the applicable interest.
Only one partial withdrawal in each financial year during the extended period will be allowed to made. In each financial year the subscriber can make only one withdrawal. If once the account is continued without deposits, for more than a year, the subscriber cannot opt again to continue the account with deposits for a block period of 5 years.
Extending the account with contribution
In order to extend the account and make fresh deposits, the Account Office has to be intimated before the expiry of one year in writing by the filing up the Form H. All new deposits will be treated as irregular and no interest will be paid if one keeps depositing without furnishing this form. The benefits of Section 80 C of Income Tax Act will not be available on deposits made in PPF account after expiry of 15 years without exercising option for continuance of the account.
Partial withdrawals during extension period:
Without contribution if you opt for extension of the account then you can make one withdrawal in each financial year of any amount within the balance. The balance also continues to earn interest.
During the extension period if you opt for extension of the account then only one partial withdrawal is allowed by applying through Form C, subject to the condition that the total of the withdrawals, during the 5 year block period, shall not exceed 60 per cent of the balance at the credit at the commencement of the extended period.
The amount can be withdrawn either in one investment (one year) or more than one installment in different years as per requirements. In the same manner during the second block period of 5 years, the subscriber can withdraw 60 percent of the whole amount at credit at the commencement of the second block period either in one year or in different years not exceeding one withdrawal a year. The limit of withdrawal will apply on commencement of every extension of block period of 5 years.
What you need to do?
It is better to extend the account if the maturity of the PPF account is not close to your retirement age. Someone who opens the PPF account at age 30, it can be extended 3 times till age 60 and beyond. It will be better to submit Form H and then extend as it will take a minimum of Rs 500 a year to keep the account active. Although 40 per cent of your corpus will remain locked in till the end of 5 years, you will certainly have the option to make partial withdrawals and still reap the benefit of compounding on the balance.