Many people opt for PPF to build a sizable corpus for retirement. PPF accounts have a lock-in of
Public Provident Fund (PPF)
Is a well-known long term investment option among Indias as it provides higher returns along with tax benefits at every stage. It falls under EEE or 'Exempt, Exempt, Exempt' category as the money you invest in it (up to Rs 1.5 lakh per annum) qualifies for tax benefit under Section 80C of the Income Tax Act. The interest earned on this deposit is not taxable and the maturity amount is also exempt from capital gains tax. As it is a government-backed scheme, the safety of capital is also there.
Due to so many benefits, many people opt for PPF to built of
If your PPF account is near maturity, here are some key things you need to know
1. Closure
Upon completion of the 15-year lock-in period, you are free to withdraw the full amount from your PPF account and close it. You need to get Form C from your bank or post office where the account was held and submit it for the closure of the account and full withdrawal.
2. Extension
Instead of closing your PPF account, you have another option of extending it by blocks of five years. You need to collect and submit Form H for extension of your account.
Another Reading: 7 Government of India Schemes to Invest for Social Security
3. Tax benefit
According to experts, you should try to invest the maximum permissible amount Rs 1.5 lakh in the years prior to maturity in order to enjoy all the advantages of tax deduction, decent interest, tax exemption on the interest, etc.
4. Extension without contribution
If you opt for continuation of the account without contribution, then you will continue to get interest for the next five years but no further contribution will be allowed. During this extended period, you will be allowed to make only one partial withdrawal in each financial year. This partial withdrawal can be of any amount. Once the account is continued without deposits, for more than a year, you cannot opt to continue the account with deposits for a block of five years.
5. Extension with contribution
In this case you also have to inform your bank/post office branch before the expiry of one year in writing by filling up Form H. If you do not fill the form and continue making deposits, then the new deposits will be treated as irregular and no interest will be paid on them. The benefits of Section 80C of the Income Tax Act will not be available on deposits made in the extended period if you do not exercise an option for the continuance of the account.
In this case, only one partial withdrawal is allowed. But the only condition is that the total of the withdrawals, during the 5 year block, period, shall not exceed 60% of the balance prior to the beginning of the extension period.
Another Reading: Things about Public Provident Fund Scheme (PPF)
It is worth mentioning that the full withdrawal of money is not allowed before the end of the 15-year period except under special circumstances like requirement of funds for serious illness or higher education of the account holder. You are, however, free to make a partial withdrawal from the seventh year onwards. The amount of withdrawal is limited to 50% of the balance at the end of the fourth preceding year or 50% of the balance at the end of the immediately preceding year, whichever is lower.
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