As explained earlier, PPF investment, returns and withdrawal are tax free and are covered under Section 80C Deductions. Read below to understand how to partially withdraw from Public Provident Fund or pre-maturely close it.
Rules & Eligibility to Withdraw PPF
Usually, PPF account has a lock in for 15 years and an individual can withdraw PPF(principal amount & interest) tax free at the end of 15 years. But there are provisions to withdraw PPF after 6th Financial year of opening PPF account.
Though there are limits to withdraw PPF before its maturity, it should be the lower amount of the below two –
- 50% of the balance at the end of previous year
- 50% of the balance at the end of year, 4 years prior to the withdrawal year.
To explain the above points, if you want to withdraw PPF in FY 2019-20, it should be the lower of 50% of balance at end of FY 2018-19 or 50% of the balance at end of FY 2015-16. PPF withdrawal can be made maximum of once a year.
Procedure to Withdraw PPF
An individual needs to submit a Form C to withdraw either partially or fully from his PPF Account. This form is available online or at the bank branch or post office branch.
To withdraw, in Form C you need to mention your PPF Account Number, Amount you want to withdraw and number of years since the account was opened. You will have to provide the bank account details in which you would want the money to be credited.
While applying to withdraw PPF, it is compulsory to enclose PPF Account Passbook.
Premature closure of PPF – Public Provident Fund
Before 2016, premature closure of PPF was not allowed. Though in 2016 government amended the Public Provident Fund Act and allowed the premature closure of PPF account but contingent to the following conditions & documents produced –
- 5 year completion of the account
- Amount is required for higher education of the account holder
- Money is required for treatment of life threatening disease or serious health issues of the account holder or any of the dependents.
If a PPF account is closed before maturity you will be eligible for a 1% interest cut on the overall span of PPF Account. For example if for 4 years the PPF Interest rate was 8%, you will receive a 7% interest if prematurely closed.
Read here to know about which forms to use and where to find them online.
Gaurav heads Growth & Marketing at Sorted AI. He is an IIT Kanpur Alumnus. He has more than 5 years of work experience in Entrepreneurship & Investment Banking where he worked with Credit Suisse & Tapp Me. He is an avid Keyboard/Percussion Player & a better discount hunter.