Public Provident Fund -PPF Withdrawal Rules & Process

There are very strict rules and procedures regarding the withdrawal of your PPF amount. It is important to know about this withdrawal process, taxability, premature withdrawal, loan facility, etc., before you withdraw it.
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Take a look at the table given below to understand how you can withdraw your Public Provident Fund (PPF) scheme partially or fully:

Withdrawal Type PPF Scheme Maturity For Partial Withdrawal For Premature Closure of Scheme
Period Post 15 years Post 5 years Post 5 years
Reason for withdrawal Any reason Any reason Educational or medical needs
Amount that can be withdrawn Complete amount 50% of your PPF balance Complete amount

Rules of PPF Withdrawal

In order to promote small savings schemes, the National Savings Organisation introduced the Public Provident Fund scheme in 1968.  Apart from offers good returns, subscribers are eligible for tax deductions under the scheme. 

Withdrawals can be made 7 years after the date of account opening. However, there are limits on the amount of money that can be withdrawn. 

Rules of PPF

Financial Year Opening balance (Rs.) Deposit (Rs.)  Rate of interest (%) Closing balance (Rs.) 
2014-2015  1,50,000  8.70  1,63,050 
2015-2016  1,63,050  1,50,000  8.70  3,40,285 
2016-2017  3,40,285  1,50,000  8.10  5,29,998 

Therefore, for the financial year 2017-2018, the individual is eligible for a loan amount of 25% of the closing balance of the financial year 2015-2016, which in this case is Rs.85,071. 

PPF Withdrawal Rules & Process
PPF Withdrawal Rules & Process

Premature Withdrawal of PPF

Premature withdrawal is allowed under the following conditions: 

  • A premature withdrawal is allowed only for a maximum of 50% of the accumulated amount. or; 
  • This withdrawal can be done only after 4 years from the date of account opening. 

The withdrawal can be made only once a year, and if there are any unpaid loans at the time of withdrawal, the collective loan amount will be reduced from the withdrawal amount. 

Premature Closure of PPF Account 

Closure of PPF account was not possible before the 15 years maturity period as per the earlier rules. However, in 2016, the government amended the Public Provident Act, and premature closure is now allowed under the following conditions: 

  • Five financial years of the account must have been completed at the time of closure. 
  • The accumulated amount is required for treatment of a life-threatening disease or serious ailment which the policyholder, or his/her dependent children, spouse, or parents are suffering from. 
  • For the policyholder’s higher education or the educational purposes of a minor account holder. 

It is mandatory to submit any relevant documents if required. 

However, in the case of a premature closure, the full amount cannot be withdrawn. If individuals opt for the premature withdrawal facility, they are paid a 1% lesser interest rate when compared to individuals who do not opt for a premature withdrawal. 

Withdrawal & Premature Closure of PPF Account 

Table for the premature closure of the PPF account: 

Financial Year Opening balance (Rs.) Deposit (Rs.)  Rate of interest (%) 1% lesser rate of interest (%)  Closing balance (Rs.) 
2011-2012  1,00,000  8.60  7.60  1,07,600 
2012-2013  1,07,600  1,00,000  8.80  7.80  2,23,793 
2013-2014  2,23,793  1,00,000  8.70  7.70  3,48,725 
2014-2015  3,48,725  1,00,000  8.70  7.70  5,37,127 
2015-2016  5,37,127  1,00,000  8.70  7.70  7,40,035 
2016-2017  7,40,035  1,00,000  8.10  7.10  9,53,228 

  

Table illustrating the account balance if premature withdrawal option is not taken: 

Financial Year Opening balance (Rs.) Deposit (Rs.)  Rate of interest (%) Closing balance (Rs.) 
2011-2012  1,00,000  8.60  1,08,600 
2012-2013  1,08,600  1,00,000  8.80  2,26,957 
2013-2014  2,26,957  1,00,000  8.70  3,55,402 
2014-2015  3,55,402  1,00,000  8.70  5,49,372 
2015-2016  5,49,372  1,00,000  8.70  7,60,217 
2016-2017  7,60,217  1,00,000  8.10  9,83,945 

  

PPF Withdrawal Forms

Form A For PPF account opening
Form B Account deposit slip used for fund deposits or loan repayments
Form C Form for partial withdrawal request
Form D Form for PPF loan request
Form E For adding PPF nominee
Form F Change in nomination of the PPF account
Form G Claim settlement form (in case of account holder’s death)
Form H Form for extension of term period after maturity

SBI PPF Withdrawal

As discussed above, the PPF withdrawal rules are same for withdrawing from SBI or any other bank in India. SBI PPF account holders can partially withdraw after completion of 5 years and the maximum withdrawal limit is 50% of the amount retained in the preceding year. But additionally, SBI offers a wide range of benefits including easy transfer of PPF account to any of its branches and online access.

List of Banks Providing PPF Facility

The following banks allow customers to open PPF accounts in India. However, it is to be noted that not all branches of these banks are authorized to do so. Therefore, kindly check the branch details of the bank you intend to open a PPF account.

  1. ICICI Bank
  2. HDFC Bank
  3. Axis Bank
  4. State Bank of India
  5. Allahabad Bank
  6. Andhra Bank
  7. Bank of India
  8. Bank of Maharashtra
  9. Bank of Baroda
  10. Central Bank of India
  11. Canara Bank
  12. Corporation Bank
  13. Dena Bank
  14. Indian Bank
  15. IDBI Bank
  16. Indian Overseas Bank
  17. Oriental Bank of Commerce
  18. Punjab National Bank
  19. Punjab and Sind Bank
  20. Union Bank of India
  21. UCO Bank
  22. United Bank of India
  23. Vijaya Bank

PPF Withdrawal Process for NRI

As per the rules, NRIs are not permitted to open a PPF account. However, if you had created a PPF account before you became an NRI, you can still keep your account until it matures. Once the scheme matures, as an NRI, you will be required to withdraw the full PPF account and close the account as you are not allowed to extend your account after this period. The Government of India has been working towards bringing some amendments with regard to PPF schemes offered to NRIs.

PPF schemes are essentially schemes that are provided for 15 years and then they can be prolonged for an additional years over intervals.

Taxability of Withdrawals of PPF

A PPF is a great savings instrument that is tax-friendly. Whenever you invest money in a PPF scheme, you can enjoy a tax deduction under Section 80C of the Income Tax Act. This is because PPFs come under the EEE (Exempt Investment, Exempt Return, Exempt Maturity or Withdrawal) category. This means that you need not pay tax whether you invest in PPF, earn from PPF, or withdraw from PPF. Moreover, the amount that you receive when the scheme matures and the interest that you get on your scheme are fully tax exempt.

You can withdraw money from your PPF account partially on a yearly basis only after you complete the 7th financial year after you open your PPF account. You can make partial withdrawals even after you extend your account once it matures after a period of 15 years. Under Section 10 (11) of the Income Tax Act, any payment that you make from a PPF is exempt from taxes.

Thus, PPFs are tax-friendly instruments, wherein you do not have to pay any tax on the principal sum when an account is closed prematurely or on the interest earned through a PPF.

Key Points to Know about PPF Accounts

Public Provident Fund is a government initiated long term investment scheme which accumulates regular interests on the deposited amount. The rate of interest payments in PPF are comparatively higher than other fixed and recurring deposit schemes of banks. PPF investments range from Rs.500 to Rs.1,50,000 and it comes with a lot of benefits including tax exemption. The scheme allows for partial withdrawals in times of emergency but the option of complete withdrawal is available only after 15 years from the date of enrollment.

  • PPF account allows one to make complete withdrawals only after the policy attains maturity i.e., at the end of the 15th year.
  • The PPF interest rates are notified by the government from time to time and for the fiscal year 2016 it is 8.7% per annum.
  • Partial withdrawals are allowed only after completion of five years from the date of initial subscription.
  • The maximum amount that one can deposit in a PPF account is Rs.1.5 lakhs.

Loan Facility for PPF Accounts

PPF loans are one of the best options to finance your short term requirements. If you compare personal loans offered by banks with that of PPF loans, the latter proves to be much beneficial in terms of interest rates. The interest rates on bank offered personal loans can be anywhere from 14% to 21%, whereas PPF loans are available at rates below 11% per annum. Given below are the key benefits of PPF loans:

  • The rate of interest on loans is roughly 2% more than the interest offered on the deposits. The Ministry of Finance has set the interest rate on deposits for this financial year at 8.7% per annum.
  • Similar to personal loans, the borrower does not have to pledge his assets for obtaining a PPF loan.
  • PPF subscribers can apply for loans only between the 3rd and 5th financial year from the date of enrollment. But the loan facility will be discontinued from 7th year.
  • The loan sanctioned will always be 25% of the PPF Balance in account at the end of the fiscal year that preceded the application year.
  • The principal amount is to be repaid within 36 months, either as lump sum or as periodic installments.
  • Only after repayment of the first loan can one apply for a second loan.

FAQ's

1. When Can Partial Withdrawals Begin?

Partial withdrawals can be made, from the start of the 7th financial year after the account has been created

It is important to keep in mind that the timeframe taken into consideration is “financial year” which is from the 1st of April – to the 31st of March the next year.

For example, if Mr. A has created a PPF account in January 2010, he will only be able to withdraw from his account from the 1st of April 2015.

Mr. A’s PPF account was opened in January 2010, which means that it was opened in the financial year 2009 – 2010. The number of financial years, counted from when he opened the account will be as follows:

  • Year 1: April 2009 – March 2010 (Account opened within this timeframe – in January 2010).
  • Year 2: April 2010 – March 2011.
  • Year 3: April 2011 – March 2012.
  • Year 4: April 2012 – March 2013.
  • Year 5: April 2013 – March 2014.
  • Year 6: April 2014 – March 2015.
  • Year 7: April 2015 – April 2016 (Mr. A can begin withdrawing from his PPF account from this date).

2. How Many Partial Withdrawals are Allowed Per Financial Year, Starting From The 7Th Financial Year after The PPF Account Creation?

Only one partial withdrawal will be allowed every financial year (starting from the 7th financial year onwards)

Considering the above example of Mr. A, he will only be able to withdraw from his PPF account once every year, starting from April 2015.

3. How Much of an Amount can be Withdrawn Once a Year, Starting From The 7Th Financial Year After PPF Account Creation?

The amount that can be withdrawn is equal to the lower of:

50% of the PPF account balance as at the end of the year immediately preceding the current year, or,

50% of the account balance as at the end of the 4th year, immediately preceding the current year.

As in the above example with Mr. A:

Year 1: April 2009 – March 2010 (Account opened within this timeframe – in January 2010).

Year 2: April 2010 – March 2011.

Year 3: April 2011 – March 2012 (This is the 4thyear immediately preceeding the year in which withdrawals are possible, assuming Mr. A opted for withdrawal option as soon as he legally could. Mr. A can withdraw an amount equal to 50% of this amount if it is lower than that of “Year 6”).

Year 4: April 2012 – March 2013.

Year 5: April 2013 – March 2014.

Year 6: April 2014 – March 2015 (This is the year immediately preceding the year in which withdrawals are possible, assuming Mr. A opted for the withdrawal option as soon as he legally could. Mr. A can withdraw an amount equal to 50% of this amount, if it is lower than that of “Year 3”).

Year 7: April 2015 – April 2016 (Mr. A can begin withdrawing from his PPF account from this date).

4. What is the PPF Maturity Duration?

The PPF account attains maturity in 15 years from the date on which it was created.

5. Is it Possible to Prematurely Close PPF Account?

No, a PPF account cannot be prematurely closed for any reason except the death of the account holder.

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