Thursday, 2 April 2015

Public Provident Fund (PPF) duration and maturity options

Public Provident fund (PPF) is one of the most favoured fixed income investment option. PPF is a long term investment option which comes with a lock-in period of 15 years and it can't be closed pre-maturely. however, during the tenure of the account, one can take loans or withdraw amounts subject to certain conditions. Read about it here -

As already mentioned original duration of the PPF account is 15 years. But note that the contribution has to be made for 16 years in all. The 15 year period is calculated from the financial year following the date on which the account is opened.

As Exp -

If PPF account is opened on Apr 1st, 2014, the actual counting to maturity begins from the end of the year, i.e. 31st March 2015. So the account will mature on 31st March, 2030. To take it other way effectively the PPF account matures on the first financial day of the 17th year.

PPF maturity options

After the original duration of 15 years it is not mandatory that one has to close the account. Infact subscriber has an option to extend his PPF account for a block of 5 yrs. That extension can be done "N" no. of times, which means subscriber can keep extending his PPF account for a block of 5 years as many times he wants. So with that option of extending the PPF account, actually there are three options for subscriber once the PPF account matures.

Explaining the PPF maturity options

  1. Complete withdrawal - Subscriber can opt to withdraw the whole amount after the completion of 15 years.
  2. Extend the PPF account with no contribution - If subscriber wants to keep earning interest on the accumulated amount over the 15 years period but doesn't want to invest any money in his PPF account, subscriber can opt for this option. Further points to note with in this option are -
    1. This is the default option meaning if subscriber doesn't take any action with in one year of his PPF account maturity this option activates automatically.
    2. Once PPF account is activated with this option of "Extension with no contribution" then the subscriber cannot put any money in the account which means no switch over to with-contributions extension is possible after that.
    3. Any amount can be withdrawn from the PPF account if the option of extension with no contribution is chosen. Only restriction is only one withdrawal is permitted in a financial year. Rest of the amount keeps earning interest.

  3. Extend the PPF account with contribution - With this option subscriber can put money in his PPF account after extension. Further points to note with in this option are -
    1. If subscriber wants to choose this option then he needs to submit Form H in the bank where he is having a PPF account within one year from the date of maturity (before the completion of 16 yrs in PPF).
    2. With this option subscriber can only withdraw maximum 60% of his PPF amount (amount which was there in the PPF account at the beginning of the extended period) within the entire 5 yrs block. Every year only a single withdrawal is permitted.

Points to note -

  • Original duration of the PPF account is 15 years.
  • PPF account can be extended in a block of five years once it matures.
  • Complete withdrawal of Public Provident Fund amount or pre-mature closure of a PPF Account is not permissible except in case of death.
  • Even a discontinued account can't be closed before maturity.
  • In the unforunate event of subscriber's death, nominee/legal heir of PPF Account holder can not continue the account but account has to be closed.

That's all for this topic Public Provident Fund (PPF) duration and maturity options. If you have any doubt or any suggestions to make please drop a comment. Thanks!


Related Topics

  1. Tax exemption benefits of PPF
  2. Deposit rules for PPF
  3. Procedure to take loan against PPF account
  4. PPF partial withdrawal rules

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>>>Go to Fixed Income Options page

4 comments:

  1. After maturity, one can withdraw the entire balance and with interest. If one withdraws entire amount leaving a balance of Rs.500/- and afterwards extend the term of the PPF account for a block of 5 years before the completion of the 16th year, how the condition that only 60% of the balance in case of an extended account is fulfilled?

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    Replies
    1. You can either withdraw the either amount or extend it.. You can't just leave some arbitrary amt .. In your hypothetical scenario you have to extend it without contribution and then you can take out whatever you wish but you can do it only once a year. Please also go through PPF Partial withdrawal rules

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  2. After extending ppf a/c for5 years and thereafter can we close d a/c before completion of five years

    ReplyDelete
    Replies
    1. It's a very specific query, please get the details from the Bank/PO where you have account.
      Though I'd suggest if it is extension without contribution, anyway you can take out most of the amount so why not go with it, rest of the amount can still earn some interest for you. If it is with contribution still you can take out 60% of the amount.

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