PPF withdrawal rules how to withdraw your partial and full PPF

PPF is one of the most popular government-backed savings schemes in India due to its guaranteed returns and tax benefits. PPF has an expiration period of 15 years after which you can choose to withdraw funds from your PPF account. Partial withdrawals before account maturity (after the sixth financial year from account opening) are also permitted, but only under certain circumstances. Here’s everything you need to know about PPF withdrawals: early partial and full closure, and extension of your PPF account after expiration.

Withdrawal of PPF at maturity

As mentioned above, the PPF account expires after a term of 15 years. At expiration, you can withdraw the entire corpus. To do this, you must present a duly completed Form C at the bank branch or post office where you have your PPF account. From that moment on, the PPF will end and the corpus will be credited to your bank account.

Extension of PPF at expiration

After your PPF account expires, you have the option to withdraw the entire corpus or extend the term of the account for as long as you like in 5-year blocks. If you do not withdraw your money from the account and close it, the account is extended by default. The account continues to accrue interest by extension, on its accumulated balance.

You can choose to expand your PPF account with or without contributions.

PPF Extension without contributions: This means that, after expiration, you keep your PPF account active but do not make any more deposits. Your overall corpus will continue to earn interest until you withdraw the full amount.

PPF Extension with Contributions: After your PPF account expires, you can keep it active and continue to make contributions to it. However, this is only possible if you have filed Form H to extend the PPF account, within one year of the account’s original expiration. If you do not file Form H, you cannot contribute more amounts to the PPF account. Such contributions will be treated as irregular and will not earn interest or earn a tax deduction under Section 80C.

Note: If you continue your PPF account without deposits for more than a year after expiration, you will not have the option to make further contributions to it.

PPF withdrawal rules after extension

Withdrawal of PPF after Extension without Contribution

After you have extended the account for a block of five years, you can only withdraw an amount up to the account balance at the time of the extension. Also, only one withdrawal can be made per year. For example, suppose your account was opened in the year 2000. You had accumulated Rs 20 lakh and extended it from 2015 to 2020. You can only make one withdrawal up to Rs 20 lakh in 2022. Second, you can only make one withdrawal in that year. .

Withdrawal of PPF after Extension with Contribution

After the extension of the account with contributions, you will only be able to withdraw 60% of the accumulated balance at the time of the extension during the new 5-year period. Also, you can only make one withdrawal per year. For example, suppose your account was opened in the year 2000. You had accumulated Rs 20 lakh and extended it from 2015 to 2020, with contributions. You can only make one withdrawal up to Rs 12 lakh in the year 2022. Second, you can only make one withdrawal in that year.

Partial/early Withdrawal of PPF

The following are the important rules related to withdrawing from your PPF account before expiration:

Partial PPF withdrawals can be made beginning in the sixth fiscal year after account opening. For example, if the account was opened on February 1, 2020, a withdrawal can be made from fiscal year 2025-26 onwards.
There is no tax on partial/early withdrawals from the PPF account
Only one partial withdrawal per exercise is allowed.

How much can you withdraw from your PPF account before expiration?

The maximum amount that can be withdrawn per year is the lesser of the following:

• 50% of the account balance at the end of the fiscal year prior to the current year, or
  50% of the account balance at the end of the 4th financial year prior to the current year.
  In the previous example, if the partial withdrawal must be made on April 1, 2017, the maximum amount that can be disposed of as a loan would be less than:

50% of the balance as of March 31, 2017 (current fiscal year is 2017-2018, therefore the fiscal year immediately preceding the current fiscal year is 2016-2017, which ends March 31, 2017)
50% of the balance as of March 31, 2014 (the current fiscal year is 2017-2018, therefore the fourth financial year immediately preceding the current fiscal year is 2013-2014, ending March 31, 2014)

Form C is required to withdraw the partial amount from the PPF account. Details such as account number, amount of money to be withdrawn, etc. must be mentioned on the form. In the event that the account is in the minor’s name, there must be an additional statement indicating that the amount is required for the use of the minor child who is still a minor and living.

PPF Partial Withdrawal Process

If you are eligible for PPF withdrawal, you can partially withdraw your balance. Here are the steps to withdraw money from your PPF account:

Step 1 – Download the PPF Withdrawal Form (Form C) from your online bank’s website or you can get it at the bank branch. There are three sections to the PPF withdrawal form:

Declaration Section – Here you need to provide your PPF account number and the amount of money you wish to withdraw. In addition to that, you need to specify how many years the account has been active
Office Usage Section – Here, you need to fill in the details like account opening date, current total balance, previous withdrawal date (if any), total withdrawal made from the account, etc.
Bank data section: bank account number and other necessary data of the account in which the withdrawn amount must be credited

Step 2: Attach a copy of the PPF savings book along with Form C.

Step 3: Submit the same at your respective bank branch

Your request will be processed and the withdrawal amount will be sanctioned as soon as possible. You can get the amount credited to your savings account or get a demand draft (DD) for it. You must mention this on the form, affix a tax stamp to it, and sign it.

Premature closure of PPF account

Premature closure of the PPF account is only allowed 5 financial years after the opening of the account. It is only allowed for three reasons:

Life-threatening illness or serious illnesses faced by the account holder/spouse/children

Higher education of children or account owner: documents confirming admission to an institution of higher education must be presented
Change in resident status of the account holder (becoming an NRI)
A penalty is imposed in the form of a 1% reduction in the applicable interest for the period during which the account is held. For example, if you earned 8% per year interest for five years on the PPF account, each year’s interest will be reduced to 7%.

Tax benefits in PPF

The PPF withdrawal is completely tax-exempt. This applies to both withdrawal at expiration and partial withdrawal before expiration.
PPF is included in the category of EEE tax implications (Exempt-Exempt-Exempt)
Investments up to Rs.1.5 lakh are exempt from tax under Section 80C of the Income Tax Act
Principal amount invested, interest earned and amount due are tax-exempt
Since the maximum contribution to PPF in a tax year is Rs 1.5 lakh, the full amount is tax deductible provided the account holder has not made any other investment under Section 80C

FAQ

Read More >>

LIC Jeevan Lakshya Policy Deposit Rs 125 in LIC Get 27 On Marriage