Public Provident Fund (PPF) is one of the best Debt oriented Saving options that are available in India. It is also one of the most tax-efficient financial instruments.
PPF Account has a lock-in period of 15 years. A Public Provident Fund (PPF) account gets matured after the completion of 15 years only.
There are certain options for an account holder to make partial withdrawals from PPF. But, a PPF account can be closed prematurely only in the event of the death of the Account holder.
The government has recently issued a notification announcing the latest PPF Account premature closure norms or rules. You can now close your PPF account before the maturity date. Click on the below image to download the latest notification on PPF Premature closure rules.
When can I close my PPF Account prematurely?
As per the latest rules, a subscriber of PPF Account shall be allowed premature closure of his/her account (or) account of a minor of whom he/she is the guardian on the below mentioned reasons;
- A PPF Account can be closed in the event of the death of the Account holder.
- PPF Account Premature Closure is accepted when the amount is required for the treatment of serious ailments (or) life threatening diseases of the Account holder (self), Spouse, dependent children or parents of the Account holder.
- PPF Account Premature Closure is also allowed when the amount is required for higher education of the Account Holder (subscriber/self) or minor account holder.
- Kindly note that you can close PPF account prematurely only if your account has completed FIVE Financial Years. (This rule is not applicable in case of ‘death’ of the account holder.)
- If the reason for Premature closure of PPF account is ‘medical treatment’, you have to produce supporting documents from competent medical authority.
- If the reason for premature closure of PPF a/c is ‘higher education’, you have to produce fee bills and documents confirming admission in a recognized institute of higher education in India or abroad (foreign country).
- Another important point is, a penalty of 1% is deducted from the applicable interest rates on the deposits held in the PPF account. This is applicable on the deposits from the date of opening of the PPF account till the date of premature closure of PPF account.
- If a PPF account that has already completed 15 years and has subsequently been extended under the provision of para 9(3A) of the PPF Scheme is closed prematurely before the completion of the current 5 year extended block period, the reduction in interest rate by 1% point shall be applicable from the date of the commencement of the current 5 year block period and not from the date of initial opening of the account. (Latest update : 02-Aug-2017)
PPF Account Premature Closure & Eligibility Amount Calculation
Below illustration gives you an idea about the impact of 1% penalty on your accumulated deposits.
- Let’s assume the account opening date of a PPF account as 01-April-2006. In this case, the premature closure of PPF account is allowed from the date of 01-04-2012. (So, if you open the account say in 2016 then premature closure will be allowed from FY 2022.)
- If premature closure happened in say 2015-16 then notice that 1% reduction in Rates of interest is applied on all the previous financial years rates of interest.
- In the above example, if PPF account is prematurely closed in FY 2015-16, you will receive Rs 1,37,170 as the withdrawal amount. Whereas, the actual accumulated balance is Rs 1,44,207.
I hope you find this post informative and useful. Kindly share your comments on PPF Account premature closure new rules. Cheers!
(References : finmin.nic.in & freefincal.com) (Post published on : 21-June-2016)