Things You Should Know When Your PPF Matures
The Public Provident Fund (PPF) is a long-term investment scheme backed by the Government of India, offering attractive interest rates and tax benefits. With a maturity period of 15 years, it’s essential to understand the options and rules associated with your PPF account upon maturity to make informed financial decisions.
Understanding PPF Maturity
A PPF account matures 15 years from the end of the financial year in which it was opened. For instance, if you opened a PPF account in May 2005, the account’s opening year is considered as the financial year ending March 31, 2006. Therefore, the account would mature on April 1, 2021.
Upon maturity, you have several options:
- Close the Account and Withdraw the Entire Proceeds: You can opt to close the account and withdraw the full corpus accumulated over the 15 years.
- Extend the Account Without Further Contributions: If you choose not to withdraw the funds, the account can be extended in blocks of 5 years without making additional contributions. The existing balance will continue to earn interest at the prevailing rates. During this extended period, you are allowed one withdrawal per financial year.
- Extend the Account with Additional Contributions: Alternatively, you can extend the account in 5-year blocks and continue making contributions. To do this, you must submit Form H within one year from the date of maturity. This option allows you to keep investing and benefiting from tax deductions under Section 80C of the Income Tax Act. Partial withdrawals are permitted, subject to certain conditions.
PPF Withdrawal Rules
Understanding the withdrawal rules is crucial for effective financial planning:
- Complete Withdrawal: After the 15-year maturity period, you can withdraw the entire balance without any penalties. This involves submitting a duly filled Form C or Form 2 in some banks) at the bank or post office where your PPF account is held. The accumulated amount will then be credited to your linked bank account.
- Partial Withdrawals: Partial withdrawals are allowed after the account has been active for at least 5 financial years. You can withdraw up to 50% of the balance at the end of the fourth financial year preceding the withdrawal year, or 50% of the balance at the end of the preceding financial year, whichever is lower. Only one partial withdrawal is permitted per financial year.
- Premature Closure: Premature closure of a PPF account is allowed after 5 years from the end of the year in which the account was opened, subject to specific conditions such as funds required for medical treatment of serious ailments or higher education of the account holder or their dependents. A penalty of 1% reduction in the interest rate is applicable on premature closure.
Utilising a PPF Calculator
A PPF calculator is a valuable tool that helps you estimate the maturity amount based on your annual contributions, the prevailing interest rate, and the investment tenure. By inputting these variables, you can project the growth of your investment over time. This aids in making informed decisions about whether to withdraw the funds upon maturity or extend the account. You can use the PPF calculator provided by a leading bank, such as ICICI Bank’s website, to estimate your returns.
How to Use a PPF Calculator:
- Choose the investment frequency: Monthly, quarterly, semi-annual, or annual.
- Enter the investment amount: Minimum ₹500 and maximum ₹1,50,000 per year.
- Choose the investment duration: Minimum 15 years.
Upon entering these details, the calculator will provide the total investment, total interest earned, and the maturity amount. This projection assists in aligning your PPF investments with your long-term financial goals.
Tax Implications
One of the significant advantages of the PPF is its Exempt-Exempt-Exempt (EEE) status:
- Contributions: Eligible for tax deductions under Section 80C of the Income Tax Act, up to ₹1.5 lakh per financial year.
- Interest Earned: The interest accrued is exempt from tax.
- Maturity Proceeds: The entire maturity amount is tax-free.
This makes the PPF an attractive investment vehicle for those seeking tax-efficient returns.
Managing Your PPF Account Post-Maturity
Leading banks, such as ICICI Bank, offer convenient options to manage your PPF account digitally. Services include online account management, fund transfers, and access to account statements. This digital accessibility ensures that you can make informed decisions regarding withdrawals or extensions without the need to visit a branch.
Steps to Open a Public Provident Fund Account Instantly
You can open a PPF account instantly through the steps mentioned below with a leading bank such as ICICI Bank.
1️⃣ Login to your ICICI Bank account via NetBanking.
2️⃣ Navigate to Bank Accounts → PPF Accounts.
3️⃣ Keep your Aadhaar card handy.
4️⃣ Fill in the details, set up standing instructions, and E-Sign.
5️⃣ PPF Account Created! Funds will be debited from your ICICI Bank savings account.
Conclusion
Upon the maturity of your PPF account, understanding the available options and associated rules is crucial for optimising your financial benefits. Whether you choose to withdraw the entire amount, extend the account with or without further contributions, or leverage the tax benefits of continued investment, making an informed decision can help align your PPF savings with your long-term financial goals. Evaluating your financial needs and using tools like a PPF calculator can assist in planning the best course of action for maximizing your returns.
Pranab Bhandari is an Editor of the Financial Blog “Financebuzz”. Apart from writing informative financial articles for his blog, he is a regular contributor to many national and international publications namely Tweak Your Biz, Growth Rocks ETC.
