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PPF Withdrawal

5paisa Research Team Date: 21 Nov, 2022 05:22 PM IST

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Introduction

In 1968, PPF investments were introduced by the Finance Ministry to enable individuals to save small portions of their earnings and gain returns from it. The tax benefits associated with PPF make it an extremely prudent choice for fulfilling post-retirement financial requirements. According to PPF withdrawal rules, you will be able to withdraw the whole amount with the accrued interest after a maturity period of 15 years.
But account holders are also eligible for partial PPF withdrawal after a certain period. You can also extend your PPF account duration in blocks of five after the maturity period. Considering the current interest rate of 7.1%, extending the duration of your PPF account does not seem like a bad idea. 
Understanding all the rules surrounding partial withdrawals, maturity, premature closure, extension, and more can get quite complicated. Keep scrolling to understand everything related to withdrawals from your PPF account.   
 

PPF Withdrawal Rules with Respect to Their Period, Grounds and Amount

According to PPF withdrawal rules 2022, you are eligible for the following: 

Withdrawal Type

Duration

Criteria

Amount Eligible for Withdrawal

After maturity

After 15 years

Nil

The whole amount along with the interest accrued on it

Partial withdrawal

After 6 years

Nil

Up to 50% of the available balance

Premature closure

After 5 years

For medical or educational expenses

Entire amount

 

 

What Are PPF Withdrawal Rules on Extension?

PPF withdrawal rules on extension state that you will be able to extend your account for as long as you want to after maturity. However, the extension can only be in blocks of 5 years at a time. 
If you don’t withdraw funds from your PPF account or close it on maturity, it will automatically get extended for another five years. After that, your account will continue generating interest at the current rate, and the amount will keep getting added to your account.  
You will be able to choose between two types of extensions for your PPF account:
●    PPF extension without contributions: This type of extension will keep your PPF account after maturity. However, you won’t be making any more contributions to your account. The total PPF corpus will keep generating interest as long as you don’t withdraw the entire amount. After the extension, you will be eligible for only one partial withdrawal in a financial year.
●    PPF extension along with contributions: Once your PPF account reaches maturity, you also have the option of making a further contribution toward it. However, extending your PPF account after maturity is only possible when you have submitted Form H. Moreover, you need to submit Form H within one year from the original maturity of your PPF. If you don’t submit the required application, you won’t be eligible to make any further contributions to your PPF. If you deposit any more funds to your PPF account without submitting Form H, the contributions won’t generate any interest, and you will also lose out on your tax benefits. 
Furthermore, you must make contributions to your PPF within one year of its maturity to continue making the contributions. On the other hand, you will withdraw 60% of your accumulated funds at the time of extension over a period of five years. The rule of making only one PPF withdrawal in a financial year remains intact. 
 

Procedure for a Partial or Complete Withdrawal of Funds from PPF

You can make a complete PPF withdrawal after the 15-year lock-in period. After withdrawing the amount along with interest accumulated on it, you will be able to close your PPF account.
According to PPF partial withdrawal rules, you can withdraw a certain amount from your account after completing five years from the date of opening it. The following points are crucial to remember regarding partial withdrawals from a PPF account:
●    Around 50% of the balance from the PPF account can be withdrawn after the seventh financial year.
●    Partial withdrawals are allowed only once in a particular financial year.
●    Individuals need to submit their passbook and an application form to make a partial PPF withdrawal. 
●    The bank verifies all details before approving the request for partial withdrawals.
●    The amount from a partial withdrawal is exempted from taxes.
You must submit Form C to withdraw your funds partially or completely from your PPF account. You can get Form C from the post office or bank where you have opened your PPF account. You can also download Form C online, get a printout, fill it up, and submit it to the respective bank or post office. 
Mentioning your PPF account number and the amount you wish to withdraw are integral parts of the withdrawal process. You need to sign the form and put a revenue stamp on it too. Once the verification process is over, the amount will reach your savings account. If you want, you can also request a demand draft. 
Apart from PPF withdrawal, you will also be able to enjoy a loan facility against your account. Before 2021, you could take a loan from your PPF account after three years of making your first deposit. Borrowers were required to pay back the loan at a 2% higher interest rate than the PPF rate. But now, borrowers need to bear an interest rate of 1% higher than the PPF rate.
The maximum amount that can be borrowed is 25% of the balance at the end of the two years before the year in which the loan application is made. If the account holder dies, the nominee or any legal heir will have to pay back the borrowed amount. The unpaid amount is usually adjusted when the account is closed after the original account holder’s demise. 
 

Tax Implications on PPF Withdrawals

PPF falls under the tax implication category of Exempt-Exempt-Exempt. Therefore, you will be able to enjoy tax exemptions on the invested amount, maturity amount, as well as earned interest. According to PPF account rules, the tax exemption is available for up to Rs 1.5 lakhs. 
Premature Closure of PPF Account
According to PPF withdrawal rules, premature closure is allowed only after five financial years of creating the account. But premature closure only takes place under the following circumstances:
●    When the account holder, their children or spouse, are suffering from a life-threatening ailment and need treatment
●    When the account holder needs to pay for the higher education of their child and can show proof of the need for funds with documents related to their child’s admission to a college or university
But premature closure comes with a penalty fee of 1% on the interest rate offered by the account.  
 

Process to Withdraw the PPF Amount

Submitting Form C for PPF withdrawal to the relevant bank or post office is mandatory in case of both partial and full withdrawals. The sections that you will have to fill up in Form C are as follows:
●    Declaration Section: This section will require you to provide your PPF account number and the reason for withdrawal. You will also have to mention the number of years for which you have been operating the PPF account. 
●    Office Use Section: This section needs the signature of the account holder with the date. The account holder must mention the amount that can be withdrawn, the amount available in the account, and the total balance in the account. The date on which the PPF account was opened and the date by which the last withdrawal request was approved also needs to be mentioned. 
●    Bank Details Section: This section will need the account holder to provide details regarding the bank account to which the withdrawn amount will be credited. This section also enables account holders to file cheques or demand draft details. 
If the PPF account holder is a minor, all their details must be provided. The bank or post office performs a thorough verification before processing the withdrawal requests. 
 

Withdrawals by Non-resident Indians (NRIs)

NRIs are not eligible for creating PPF accounts. But in case they created an account before becoming NRIs, they will have to continue maintaining the account until its maturity. Once the account reaches maturity, the entire amount from it needs to be withdrawn. The PPF account will also get closed right after the funds are withdrawn. As an NRI, you will miss out on the opportunity of extending your PPF account. 

 

PPF Tax Benefits

You will be able to enjoy PPF tax exemption during partial withdrawal as well as during maturity. You are allowed to deposit a maximum of Rs 1.5 lakh to your PPF account in a particular financial year. Therefore, investments up to Rs 1.5 lakh are exempted from taxes under section 80C. However, you shouldn’t have invested in other tax-saving instruments to enjoy the deductions on the full amount. 

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Frequently Asked Questions

According to PPF premature withdrawal rules, partial withdrawals from your PPF account can only begin after the second year. 

According to PPF account rules, you are allowed to make only one partial withdrawal in a particular financial year. 

PPF accounts have a maturity period of 15 years, and you can withdraw your funds after that. However, you can also close your PPF account after 5 years of maintaining it.
 

You will be able to raise withdrawal requests from your online PPF account. Apart from PPF withdrawal online, you will also be able to access all account information through your online PPF account.