Can I withdraw from my PPF account before 15 years?

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The Public Provident Fund (PPF) is a widely favored long-term investment choice in India, known for its appealing interest rates, tax advantages, and assured returns, making it popular among conservative investors. Although a PPF account has a lock-in period of 15 years, many wonder if early withdrawals are possible. The answer is yes, but there are specific withdrawal steps and criteria.

In this Blog, we will discuss PPF Withdrawal rules before the 15-year term is completed. We will also discuss other important aspects, such as the penalty for premature closure, using a PPF withdrawal calculator, and much more.

What is a Public Provident Fund (PPF)?

A Public Provident Fund (PPF) is a popular long-term savings option that appeals to people of all ages due to its ease of opening accounts at post offices and banks, guaranteed returns, tax advantages, reasonable interest rates, and the significant lump sum available at maturity.

Additionally, PPF contributors can benefit from partial withdrawals, early account closure in emergencies, and the ability to borrow against the accumulated funds. The highlight, however, is the annual compounding of interest. According to the latest announcement from the Finance Ministry, the current interest rate on PPF deposits is 7.1%.

What are Public Provident Fund (PPF) Withdrawal Rules?

After the Tenure Ends – The 15-year period is calculated from the end of the financial year in which the first contribution was made. For example, if you made your initial payment on June 15, 2010, the maturity date would be April 1, 2026. After this period, you can choose to withdraw a portion of your funds and extend the scheme for another five years without making any additional contributions.

Completion of Seven Years Period – According to PPF partial withdrawal rules, you can withdraw up to 50% of the total amount in your PPF account after seven years, starting from the end of the financial year in which your first contribution was made. There is a limitation of one partial withdrawal each year. To make the withdrawal, you need to present your PPF passbook and an application at the bank or post office. This withdrawal is exempt from income tax. You can withdraw the smaller amount between 50% of the current account balance or 50% of the balance from four years ago.

Premature Closure – In certain situations, you can close your PPF account before the 15-year term ends. This is allowed for reasons such as financing higher education or covering medical expenses for a life-threatening illness affecting the account holder or their dependents.

Loans – Beginning in the third financial year after your initial deposit, you can take a loan from your PPF account at an interest rate that is 1% higher than the PPF rate. The maximum loan amount can be up to 25% of the balance remaining at the end of two years prior to the application year. In the event of the account holder’s death, the nominee or legal heirs will be responsible for paying the interest on any outstanding loans. This obligation may need to be adjusted while the account is still active.

PPF Withdrawal Procedure – According to PPF account withdrawal rules, you need to submit Form C, which is available at the bank or post office. The form must include your account number, the amount you wish to withdraw, your signature, and a revenue stamp. After completing the form, you should submit it along with your passbook. Once approved, the withdrawn amount will be directly credited to your savings account.

Money withdrawal from PPF before 15 Years

If you want to close your PPF account before it reaches maturity, you can do so under certain conditions, as long as the account has been active for at least five years. However, a penalty of 1% will be applied, which means you will receive 1% less than the current interest rate for the entire period your account was active. Premature closure is allowed in the following situations:

Medical Emergency – If you or a family member require funds for medical treatment, you can either make a partial withdrawal or close the account after it has been active for five years.
Higher Education – To fund your children’s higher education, you can close the account or make a partial withdrawal after five years, provided you present documentation such as fee receipts and admission papers.
Relocating Abroad – If you or the account holder is relocating to another country, you can close the PPF account and withdraw the entire balance.
Death of the Account Holder – In the event of the account holder’s death, the account can be closed before maturity without the five-year requirement, allowing the nominee or legal heir to withdraw the remaining balance.

Steps to Withdraw Money from your PPF before 15 Years

1. Check Eligibility Criteria – Make sure your account has been active for a minimum of five years to qualify for partial withdrawals or early closure.

2. Determine the withdrawal type: Partial withdrawals are permitted after five years of account activity. Premature closure can be approved for specific reasons, including medical emergencies, higher education, relocating abroad, or the account holder’s death.

3. Documentation – To prepare documentation, for partial withdrawals, complete Form C, which can be obtained from your bank or post office. For premature closure, fill out the premature closure form and include any necessary supporting documents related to your reason for closure, such as medical certificates, admission receipts, or proof of relocation.

4. Form Filling – Fill out Form C for partial withdrawals by including your account number, the desired withdrawal amount, and your signature. For premature closure, complete the necessary closure form.

5. Submission of Forms and Documents – Submit your forms and documentation by visiting your bank or post office with your completed form and PPF passbook. For partial withdrawals, provide Form C and the passbook. For premature closure, submit the closure form, the passbook, and any additional required documents.

6. Receive Funds – Upon receiving funds, for partial withdrawals, the amount will be credited to your savings account. In the case of premature closure, the entire account balance will be paid out, minus any applicable penalties, such as a 1% interest penalty.

7. Verify your Transaction – Verify that the withdrawn or closed amount is accurately processed and credited to your account.

FAQs

Q1. Can I close my PPF Account after completing 1 year?

Ans. No, you cannot close a PPF account after only 1 year. The account needs to be active for at least 5 years to qualify for premature closure under certain conditions.

Q2. How to close my PPF Account before Maturity?

Ans. To close a PPF account before maturity, ensure it has been active for at least 5 years and submit the required closure form along with supporting documents and your passbook at your bank or post office.

Q3. Can I close my account before 5 years?

Ans. No, you cannot close a PPF account before it has been active for 5 years. Premature closure is only possible after the account has been open for at least 5 years, under certain conditions.

Q4. How much is the PPF premature Closure Penalty?

Ans. The penalty for closing a PPF account prematurely is a 1% reduction in the interest rate applied to the accumulated balance.

Q5. What is the PPF Withdrawal Calculator?

Ans. A PPF withdrawal calculator is a tool used to estimate the amount you can withdraw from your PPF account, taking into account factors like the account balance, duration, and relevant regulations.