PPF Withdrawal Rules 2023: A withdrawal can be made every year from the 6th financial year up to 50 percent or the balance to his credit at the end of the fourth year immediately preceding the year of withdrawal or the end of the preceding year, whichever is lower. The withdrawal may even be made every year.
Here, we will examine the conditions that allow a premature closure, including instances where life-threatening diseases affect the account holder, their spouse, or dependent children, as well as when the account holder or dependent children pursue higher education.
Moreover, an interest deduction of 1% will be applied from the date of account opening or extension, if applicable, to the date of premature closure.
We need to go deeper into the PPF withdrawal rules related to premature closure, partial withdrawal, and PPF loans to better understand how they will affect PPF account holders.
Quick Summary About PPF Withdrawal Rules
| Aspect | Details |
|---|---|
| Partial Withdrawal | – Account holders can make partial withdrawals after the 6th financial year from the account opening.<br>- Only one partial withdrawal is allowed per financial year. – Withdrawals are tax-free. |
| PPF Account Extension | – After maturity, three options: 1. Close the account and withdraw the entire balance. 2. Extend without new deposits (flexible partial withdrawals allowed). 3. Extend with new contributions (limited withdrawals allowed). |
| Extension without Contributions | – Money continues to earn interest. – Account holders can withdraw any amount once per financial year, but fresh contributions are lost permanently if the account remains without deposits for more than one year during the extension. |
| Extension with Contributions | – If extended with contributions, account holders can withdraw up to 60% of the account balance at the start of the extension period during the fresh 5-year term. – Fresh contributions lost permanently if no deposits for over one year. |
| PPF Loan | – Eligibility: After 3 years but before the end of the 6th year from account opening. – Interest Rate: 1% above the prevailing PPF interest rate for the entire 3-year loan tenure. – Maximum Loan Amount: 25% of the PPF balance. |
| Premature Closure | – Allowed after 5 years from the end of the year of account opening. – Conditions for premature closure: 1. Change in residency status. 2. Life-threatening disease (account holder, spouse, or dependent children). 3. Higher education (account holder or dependent children). |
| Penalty for Premature Closure | – The interest rate applicable is reduced by 1% from the rate at the beginning of the account period. – Account holders must consider the impact of the penalty on overall returns when deciding on premature closure. |
| Government Guarantees | – Assured interest rate not fixed; government reviews and declares rates periodically. – Full security provided by the Government of India for PPF accounts. – Credit balance protected from attachment under court orders or decrees. |
PPF Partial withdrawal
There are certain conditions for partial/premature withdrawal from PPF accounts (Public Provident Fund):
- PPF account holders can make partial withdrawals after the sixth financial year from the account opening.
- A partial withdrawal is allowed only once per financial year. A single withdrawal can be made by account holders during each financial year.
Withdrawals from a PPF account are not subject to tax, so it is a tax-efficient option.
For Example:
Sunita opened a PPF (Public Provident Fund) account on September 1, 2018. According to the PPF rules, she becomes eligible for partial withdrawals from her account starting from the 6th financial year after the account’s opening.
Since Sunita’s account was opened on September 1, 2018, the 6th financial year would be from April 1, 2024, to March 31, 2025. Therefore, Sunita can initiate partial withdrawals from her PPF account in the financial year 2024-25, which begins on April 1, 2024, and extends until March 31, 2025.
PPF withdrawals Rules Extended Account
The PPF account holder has three options after the PPF matures.
- Closing the account and withdrawing the entire balance
- Extend the account without depositing new funds
- Make a fresh deposit to extend the account.
Therefore, we will discuss how to withdraw money from the PPF account if you extend it.
PPF Withdrawal Rules Without Contribution
After the maturity period of a PPF account is over, account holders have the option to extend the account without new deposits or contributions.
- The available money in the account continues to earn interest at the applicable rate.
- Account holders can withdraw any amount from the PPF account once in every financial year, providing flexibility for partial withdrawals.
- However, if the account remains without new contributions for more than one year during the extended period, the option to make fresh contributions to the account is lost permanently.
PPF Withdrawal Rules With Contribution
PPF account holders have the option of extending their account after its maturity period is over without making new contributions or deposits. During the extension period:
- If the account is extended with additional contributions, the account holder can withdraw up to 60% of the account balance at the start of the extension period during the fresh 5-year term. Only one withdrawal is allowed per financial year.
- It’s important to note that if the account remains without new contributions for more than one year during the extended period (whether extended with or without contributions), the option to make fresh contributions to the account is lost permanently.
PPF Loan
- Eligibility: PPF account holders can avail a loan from their PPF amount after completing 3 years (financial years) but before the end of the 6th year (financial year) from the account opening.
- Interest Rate: The interest charged on the PPF loan is 1% above the prevailing PPF interest rate at the time of availing the loan. This interest rate remains fixed for the entire loan tenure.
- Loan Tenure: The loan tenure is set at 3 years.
- Maximum Loan Amount: The maximum loan amount that can be borrowed is 25% of the PPF balance available two years before the date of the loan application.
- Repayment Options: The loan can be repaid either in monthly installments or as a lump sum amount.
Other Important Points Related to PPF Account
Assured Interest Rate: The government guarantees the interest rate on PPFs, which is not fixed. The government reviews and declares interest rates periodically.
Government security: The Government of India provides full security for PPF accounts. The government ensures the safety of deposited money in case the bank defaults, providing account holders with peace of mind.
Protection from attachment: The credit balance in a PPF account is protected from attachment under any court order or decree for debts or liabilities incurred by the account holder. A PPF account is protected against seizure and garnishment by this safeguard, providing the account holder with financial security.
PPF Premature closure
The PPF account matures after 15 years from the date of opening. Account holders can withdraw the entire balance after the maturity period (15 years). Premature withdrawal is allowed after 5 years from the end of the year in which the account was opened, subject to specific conditions.
The premature closure is allowed after 5 years from the end of the year in which the account was opened subject to the following conditions.
- Condition 1: PPF account can be closed prematurely on a change in residency status of the account holder on production of a copy of passport and visa or income tax return.
- Condition 2: In case of life-threatening disease of the account holder, spouse, or dependent children.
- Condition 3: For higher education of the account holder or dependent children.
Consequences of Premature Closure or Withdrawals: The interest rate applicable for the period the account was held was reduced by 1%. Suppose the interest rate was 7.1% at the beginning of the account, but was subsequently reduced to 6.1% when closed prematurely. While making decisions about premature closure, PPF account holders must evaluate the impact of this penalty on their overall returns.