By Priyanka Sambhav
The Public Provident Fund (PPF) is one the most sought after long-term savings-cum-investment scheme regulated by the government. To get started you need to open a PPF account with a bank. Your investment in PPF has 15 years lock-in. One can invest a minimum of Rs 500 and a maximum of Rs 1.5 lakh. You can make payment to a PPF account every month or you could also pay a lump sum in one go. Though a PPF matures in 15 years which means you can’t withdraw money before that but one can avail loans on PPF from the third financial year. However, this facility is available only until the end of the sixth financial year.
PPF Partial Withdrawal Rules
If there is a requirement of the fund then PPF allows the investor a partial withdrawal . After completion of 6 years i.e. from the 7th year, one can apply for partial withdrawal of the amount accumulated. For example, if you have opened an account in January 2015 then you will be able to withdraw the money from FY-2020-21 partially. From the 7th year onwards PPF allows one withdrawal per year, but the condition is the withdrawal amount will be
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50% of the balance at the end of the 4th financial year
Or
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50% of the balance immediately preceding the year of withdrawal
The withdrawals from PPF, either partial or in whole are exempt from taxation.
When can you opt for premature closure of the PPF account?
Premature closure of the PPF account is permitted after five years. Penalty interest of 1% will be charged on early closure. It can be done only under special circumstances and on the production of documents supporting the claim.
Circumstances required for premature closure of PPF account :
1. Serious ailment or life-threatening diseases that require medical attention for the account-holder, spouse, or dependent children or parents. You will need to submit supporting documents from the medical authorities.
2. Higher education of the account holder. You will need to produce the documents and fee bills in confirmation of admission in a recognized institute of higher education in India & abroad.
Tax on Withdrawal
PPF falls under the exempt-exempt-exempt (EEE) tax benefit category. The interest earned on the funds is tax-free and so is the premature withdrawal. This makes PPF a great investment.
