Partial Withdrawals of PPF – Eligibility and Rules in 2021
Public Provident Fund is one of the safest fixed income investment options in India, which is backed up by Government of India. Many investors would opt for PPF either for tax saving purpose or for accumulating retirement corpus. Even low risk investors who want to avoid equity would opt for PPF as an investment option. One of the painful things in partial withdrawals of PPF or premature closure. It allows partial withdrawals based on eligibility and several guidelines around it. In this article we would provide eligibility for partial withdrawals of PPF, eligible amount and various rules and regulations for such PPF withdrawals.
What is Public Provident Fund?
Skip this section if you are already familiar with PPF.
Public Provident Fund is a saving scheme that provides fixed income that is backed up by Govt of India. PPF has a tenure of 15 years. One can invest as low as Rs 500 per financial year with a maximum limit of Rs 1.5 Lakhs during the financial year. The interest rates are reset by Govt of India every 3 months. One can also invest along with their spouse (each Rs 1.5 Lakhs per year) totaling to Rs 3 Lakhs per year and get almost Rs 94 Lakhs (depending on interest, this amount can vary) on maturity period of 15 years.
One of the painful thing is PPF does allow premature withdrawal only in extreme cases with several T&C. It offers partial withdrawals with several terms and conditions. In this article we would focus only on partial withdrawals from PPF.
What is the eligibility for partial withdrawals of PPF?
Here are the rules on partial withdrawals from PPF.
1) Partial withdrawals are allowed after 5 years from opening PPF.
2) PPF holders are eligible to withdraw 50% of the PPF amount after this defined period. This 50% amount is computed based on lower of
PPF balance by the end of the previous financial year or
50% of the PPF balance by the end of the fourth financial year from the preceding financial year.
3) One need to submit Form C to the bank or post office where their PPF is opened. They need to provide PPF account number + amount to be withdrawn and provide their signature in that form. One need to submit Form C + PPF passbook at the bank or post office. In case you have access to online PPF account, you can visit the internet banking portal and put the request for partial withdrawal of PPF.
4) Bank / post office where the PPF account is opened would verify the application, eligibility and amount and then process the payment. The amount would be credited to PPF account holder bank account or in case the savings account is not available for some reason, they would issue DD for the amount.
5) PPF rule allows one withdrawal every year from seventh year onwards.
6) PPF partial withdrawals are tax free in the hands of investors.
How PPF withdrawal amount is calculated – Explained with an example
Let me explain with an example. PPF account is opened in January, 2011 with Rs 50,000. The eligibility to withdraw PPF would be from financial year 2016-17 (5 years). Here is how the eligible amount is calculated.
(a) 50% of balance as of the end of the fourth year from account opening – Rs 3.4 Lakhs x 50% = Rs 1.7 Lakhs
(b) 50% of balance of previous year ending – Rs 8.4 Lakhs x 50% = Rs 4.2 Lakhs
The eligible amount for a partial withdrawal from PPF is Rs 1.7 Lakhs (lower of (a) and (b)
PPF Withdrawal Rules after 15 years extension
PPF holder can extend their PPF account beyond for 15 years for a block period of 5 more years. In such case one can make a partial withdrawal of 60% of the balance that was available during such extension.
You may like: List of Tax Saving Investments and deductions u/s 80c
Frequently asked questions (FAQs) about Partial withdrawal of PPF
Is Partial withdrawal from PPF taxable?
Partial withdrawal from PPF is not taxable. These are tax free in the hands of the investors.
How do you break Public Provident Fund?
In normal scenario, you cannot break a PPF unless you are going with premature closure where specific T&C applies.
Can PPF withdrawn before 15 years?
PPF has a 15 year lock-in period. However, partial withdrawal of PPF allowed after 5 years. One can do one partial withdrawal from 7 th year onwards till maturity.
How can I do PPF withdrawal online?
If your PPF account is linked to your internet banking portal, you can login to banking portal and put a request for PPF withdrawal online.
How can I get authentic information about PPF withdrawal rules?
One can get these PPF rules from Income Tax Website itself here.
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