When & How You Can Withdraw Money From Your PPF Account Despite The 15-Year Lock-In Period

PPF (Public Provident Fund) has been one of the first ports of call whenever many Indians think of fulfilling the twin objectives of tax savings and investment. While its EEE tax status and sovereign-backed guarantee are among its highlights, the biggest disadvantage of PPF lies in its lock-in period of 15 years.

When & How You Can Withdraw Money From Your PPF

shutterstock

Also Read: 5 Low Risk Tax Saving Investment Options For Investors

However, the long lock-in period does not necessarily mean that your entire money gets locked in for 15 years.

So read on as we explain the premature closure, partial withdrawal, and loan facility that PPF provides to its investors.

Partial Withdrawal Rules

Partial withdrawals are allowed only once in a financial year and after the expiration of five years from the end of the year in which the account was opened.

Amount of partial withdrawal can be taken up to 50% of the balance at the end of the fourth preceding year or at the end of the preceding year, whichever is lower.

Premature Closure Rules

getty

A PPF account can be prematurely closed five years after it is opened. A PPF account holder can be allowed premature closure of his or her account on any of the following grounds:

(a) treatment of a life-threatening disease of the account holder, his spouse, dependent children, or parents, upon production of supporting documents and medical reports confirming such disease from treating medical authorities;

(b) higher education of the account holder or dependent children on production of documents and fee bills in confirmation of admission in a recognised institute of higher education in India or abroad;

Provided that an account under PPF shall not be closed before the expiration of five years from the end of the year in which the account was opened.

As per NSI (National Savings Institute), provided further that on such premature closure, interest in the account shall be allowed at a rate that shall be lower by one percent than the rate at which interest has been credited in the account from time to time since the date of opening of the account, or the date of extension of the account, as the case may be.

(c) on a change in residency status of the account holder upon production of a copy of their passport and visa or their income tax return.

Also Read: PPF vs Bank Tax Saver FD-Which One To Choose For Tax Saving?

Loan Against PPF Rules

getty

Besides the premature closure and partial withdrawal, PPF investors can also avail themselves of the facility of a loan against their PPF deposits after the expiration of one year from the end of the financial year in which the initial subscription was made. The loan can be taken before the expiration of five years from the end of the year in which the initial subscription was made.

But the loan amount has been capped at 25% of the balance available two years prior to the loan application year. Further, a second loan against PPF can also be taken, but only if the first loan has been fully repaid. Only one loan can be taken in a financial year.

Loans are repayable either in one lump sum or in instalments. The principal needs to be repaid within a period of 3 years from the first day of the month following the month in which the loan is sanctioned. After the repayment of the principal amount of the loan, the interest has to be paid in not more than 2 monthly instalments at a rate of 1% p.a.

Of the principal amount, interest on the outstanding loan amount shall be charged at 6% p.a. in the event of failure to repay the loan amount in full or in part within 3 years.

Also Read: PPF vs ELSS vs Tax Saver Bank FD

For more such interesting content and the latest financial news, keep reading Worth. Click here.