Public Provident Fund (PPF) – New Withdrawal Rules in 2016
PPF is one of the best retirement saving schemes which provides highest tax free interest rates for 15 years. One of the biggest drawbacks was about withdrawal of money from this scheme before maturity. Last week, Ministry of finance announced some changes to the PPF Withdrawal from 2016 onwards which would benefit many investors. What are the New PPF Withdrawal rules introduced from 2016 onwards? How one can withdraw PPF amount before maturity? What are the guidelines for partial withdrawl of money from PPF?
Also Read: Ways to transfer money from bank account to your PPF account online?
What is PPF Account?
If you are already familiar of PPF, you can skip this section.
The public provident fund (PPF) scheme was introduced in the year 1968 by the ministry of finance. It is an important tax saving tool for the citizens of India as it attracts many tax benefits. It is an account that can be opened in any authorized bank or authorized bank branch. The interest earned on the deposits of PPF account is tax free and also the amount contributed towards the PPF account can be claimed as deduction.
Features of the PPF account
The key features of the PPF account are listed below.
- The interest rates are governed by the central government and declared on the annual basis. The interest is credited annually in the account.
- The initial investment with which the account can be started is Rs. 100.
- The account is opened for tenure of 15 years. After maturity, the account continuance is allowed for 5 years with or without deposition of fund.
- The amount deposited in the account can range between Rs. 500 to 1,50,000 per annum. The amount can be revised as per the government rules.
- It is compulsory to invest a minimum of amount in the account in order to keep it active. Failure may result in the inactivation of the account.
- The complete withdrawal of funds can be made only at maturity. However, partial premature withdrawals can be made subject to certain conditions.
How to get maximum interest on PPF?
The interest rate for the financial year 2016-2017 is 8.1% per annum. In the year 2015-2016, it was 8.7% p.a. The interest is compounded annually and credited at the end of every financial year. It is calculated as per the rates announced by the government and it keeps on fluctuating. The amount deposited before 5th of every month is counted for interest for that particular month. For e.g. if your account shows a balance of 1,20,000 and a deposit of Rs. 5,000 is made on 7th of August, interest will be calculated on 1,20,000 for the month of August and from September, it would be 1,25,000. So, in order to maximize your earnings, deposits should ideally be made from 1st to 5th of any month. You can refer my article about getting maximum interest in PPF.
New PPF withdrawal rules from 2016 onwards
- The finance ministry has announced that the PPF account holders will be able to make a premature closure of their account provided that it is 5 years old. But, the condition is that the amount is going to be used for a specific reason. The amount can be used for the treatment of serious or life-threatening disease of the account holder or his spouse/children of parents. The amount can also be used for the higher education of the account holder. For this, he has to submit the supporting documents and bills as per the reason claimed for the premature closure of the account. This facility has given the liquidity to the account holder as he will not feel that his money is stuck and he cannot use it when he needs it the most.
- This announcement will attract many individuals who were not interested to open this account.
- In case you opt for premature closure of PPF account you need to be ready to accept the applicable penalty. As per new PPF rule 1% interest penalty is applicable for PPF account closure. This means you will be paid 1% less interest on the interest rate applicable from time to time on the deposits held in the account (e.g. 1st year, interest rate is 8%, you would be paid 7%, 2nd year, interest rate is 8.5%, you would be paid 7.5% etc.,)
You may like: NPS Vs PPF – Which is best retirement scheme in India?
Earlier guidelines about premature withdrawal would continue and here are the details.
- A person is allowed to withdraw the amount only after the completion of five years of opening the account. If a person opens a PPF account during any time of a particular financial year, say in December 2010, his first year would commence on 1 April 2011 although he has invested in the financial year 2010-2011. So, counting from 1 April 2011, his five years ends on 31st March 2016. Before this date he is not allowed to withdraw a penny out of this account. From 1st April 2016, he can make withdrawals from PPF account. It is to be noted that only one partial withdrawal is allowed every financial year.
- The amount that can be withdrawn is equal to the lower of:
– 50% of the account balance as at the end of the year immediately preceding the current year: or
– 50% of the account balance as at the end of the 3rd year, immediately preceding the current year.
Conclusion: PPF is one of the most popular tax saving schemes for Indians. With the introduction of clause partial withdrawal, the liquidity of the funds has increased. These clauses have tried to overcome the biggest drawback of the non-liquidity of the account.
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Suresh
Public Provident Fund (PPF) – New Withdrawal Rules in 2016
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i have a ppf a/c opened in 2005 and wants to close my a/c. i am a senior citizen. do i need to wait to complete 15 years or can i withdraw the full money deposited in ppf a/c?
My ppf account after further extention of five years I.e 15+5 now it will be mature on 31march 2018.I wants to extend it for further five years I.e up to 2023.but if I wants it close in year 2020 or 2022 ,than what are the provisions for closing . What will lose to me before maturity I.e before 2023.
My Question- can an individual pre maturily close PPF account in the 18th year as it was extended for 5 years on completion of 15 years
If yes then what is the procedure/ condition . Is there any penalty involved .
Thank You so much
Promila
Sir, I have a PPF account with SBI. It matured on 31.3 2014 but i extended it till 31.3.2019. I now wish to withdraw maximum permissible amount before final closure. What are the rules?
i have a ppf a/c which i started on 26/3/96 . i now want to withdraw complete amount but would like to know if i will get interest till date of withdrawl or interest will be credited for this year only in march 2018 ? i dont want to lose the interest for the period april-december 2017 if i withdraw now. kindly let me know. thanks
NO YOU DON'T GET 12 MONTH INTEREST RATE IF YOU CLOSE PPF ACCOUNT BEFORE COMPLETE THE MATURE PERIOD YOU GET ONLY THAT (FOR EXAMPLE :-YOU OPEN PPF ACCONT ON OCT SO YOU HAVE TRO COMPLETE THAT MONTH
NO YOU DON'T GET 12 MONTH INTEREST RATE IF YOU CLOSE PPF ACCOUNT BEFORE COMPLETE THE MATURE PERIOD YOU GET ONLY THAT (FOR EXAMPLE :-YOU OPEN PPF ACCONT ON OCT SO YOU HAVE TO COMPLETE THAT MONTH OTHERWISE YOU GET 10 MONTH RATE.
The lady at the PO told me that one can only withdraw Rs 25,000 at one time. This is not as per the new Rules of withdrawl.
Pl indicate what action can I take
Sir my ppf accout completed 15 year in Jan 2016 . I have not given any option to post office .Now I want to deposit amount in my account .post office officials say that it is not possible.Is there any way to again start my ppf with subscription
Subhash, You can close and reopen the PPF account on same day (as it was matured and you have not extended)
I have ppf a/c with sbi open in 1997 & extended two time with contribution for 5 yr now maturity dt 2022 I have to close ppf a/c dt 19.9.17 but bank official reject my application & state that a/c can closed on maturity pl intimate that can I close my a/c or not & where did I approach for same
HI I am having a ppf ac now it is already completed 20 yrs now I am giving a extension for 5 yrs with subscription payment every year.
Secondly I want to withdraw from that ac so how much I can withdraw that is my question.pl inform
i opened two PPF accounts one of my name another of my minor son’s name , i have attached my PAN for both account , i heard that i will get interst only on Rs 1.50 lakh for both accounts and excess amount remains interest free with the bank , can i close the 2nd account of my son which i just opened before 2 days
once I completed 15 yrs. of PPF in 2015 I extended it for another 5 years. Now I want to close it prematurely after paying for two years i.e. 2016 and 2017 . Can I close it now or I have to wait till 5 yrs complete in 2019. Please advise
Hi,
I am planning to opened ppf account for me in the month of July 2017 with initial amount 500rs, I want to pay 1.5 Lac at a time every year. I read many blog that best time to open ppf in the month of april, but i am opened July, so how much reaming money i need to pay before april 2018? Can i pay 1.5 lay in august 2017 and again i will pay 1.5 April 2018 is this ok?
Thanks,
Nasim
Nasim, don’t worry, when we said you would get maximum benefit is that you can get tax free returns from Apr itself . You are just 3 months late, thats okay. You can deposit Rs 1.5 Lakhs every year in Apr so that you would get tax free returns for the entire year instead of part of the year.
My PPF account was extended for 5 years after completing 15 years in 2015. I want to close my account Can I close it now or I have to wait till 5 years are completed Please guide.
Hi Promila, You can close the PPF account any time after 15 years and need not wait for 5 years
Thank you dear Mr Suresh. I just want one clarity sir i.e. after completing 15 years in 2015 my account was extended for 5 years i.e. from 2015 to 2019. I deposited some amount in 2016 and 2017 . But I want to close it now in the current year. Pleas let me know if I can close it now in 2017 or I need to wait till 2019 till completion of 5 years
Thank you
Promila
Please tell me the procedure to ckose the ppf acoount
I would like to close my PPF account taken from Post office. I had joined the post office PPF scheme on 20th June 2012. Due to commitment for paying my daughters 2nd year BTech fees, I intend to close the account. Can I do the closure of this account. Will I get the entire amount deposited in the scheme. Please clarify.
With regard to the PPF account, what would happen if the account become inactive because of the non-payment of compulsory minimum annual amount. After five years, if I want to close the account, what kind of deductions or penalty will be applied.
If you don’t deposit minimum amount, you would not get full interest rate.
By mistake I have opened two ppf a/c in two different banks. First one is 8yrs& second one is 3 years old. However I have not deposited more than 150000 combindly in any year.
Suggest me what can I do.
Yoiu can go ahead and close the PPF account which is 8 yrs old
in my openion 3 yesrs old should be closed. Reasons behin is after 7 years (8+7=15 years) you will get the benefit of:
1. extension for 5 years
2. 60% withdrawal
3. no panatly clause
4. no minimum amount of Rs.500/-.
Suppose my account is 5 years old. Can i take premature withdrawl for House Purchase?
A person working in India moved to USA and obtained green card and not likely to return to India in the near future. He does not have a Aadhar Card but on ly a PAN Card. Can he give the reason having moved to USA for withdrwal of PPF. Guide me on Aadhar Card requirement and ways to witrhdraw from PPF after 5 years
after completion of 15years in PPF account , can the account be extended for a further period of 5 or 10 years.
My dad has a ppf account and he has retired so can he remove the whole amount?
My husband had opened PPF Account. His account completed 15 Years.but did not withdraw the amount after maturity.He continued it for 2 years now. He now required to withdraw some amount from it for some medical surgery. Can he withdraw from his account. How much time required for it.
Article is full of knowledge and will help PPF A/C holder.
If one becomes NRI and PPF a/ gets matured no doubt he/she can't extend the PPF.
Please let me know if the amount is not withdrawn on maturity will the a/c holder continue to get interest till the amount is withdrawn?
For how long one can keep a/c inactive and keep getting interest?
With regards
Thanks a lot for the updates
Thanks,
Prashanth
Hi Suresh,
Can NRIS invest in PPF?
NRI’s cannot open new PPF account. If they have opened PPF and then became NRI’s they can continue to invest in PPF account
Good information. I am sharing in my FB group.
Thanks
Thank you KVS
Thank You Suresh for the informative write up on PPF.
Request you to also write similar article on PF withdrawl for employees working in Private Sector , there is lot of confusion on the new restriction imposed by government.
Sure Austin
Thank You
Nice update and good useful knowlledge, thanks for sharing the same so nicely.
Thank Arun