PPF Withdrawal Rules: Partial & Complete Closure Rules

1. Introduction to PPF

The Public Provident Fund (PPF) is a popular long-term savings scheme in India, offering tax benefits and guaranteed returns. It is backed by the Government of India, ensuring safety and reliability for investors. Apart from tax savings under Section 80C of the Income Tax Act, PPF also provides partial liquidity through withdrawal options and complete closure provisions after a specific period.

2. Partial Withdrawal Rules

1. Eligibility for Partial Withdrawals

• Partial withdrawals from a PPF account are permitted from the start of the 7th financial year.
• For example, if the account was opened in April 2020, partial withdrawals can be made from April 2026 onwards.

2. Maximum Withdrawal Limit

• The maximum amount that can be withdrawn is the lower of:
  • 50% of the balance at the end of the 4th year preceding the year of withdrawal, or
  • 50% of the balance at the end of the previous year.

3. Frequency of Withdrawals

• Only one partial withdrawal is allowed per financial year.

4. Purpose of Withdrawal

• There are no restrictions on the usage of the withdrawn amount, making it suitable for emergencies or financial needs.

3. Complete Closure Rules

1. Tenure of the PPF Account

• A PPF account has a tenure of 15 years, after which the account can be completely closed.

2. Withdrawal on Maturity

• Upon maturity, the entire balance, including the principal and interest, can be withdrawn tax-free.

3. Extension Without Contributions

• If the account holder does not withdraw the balance after maturity, the account is extended by default for another 5 years without any contributions. The balance continues to earn interest during this period.

4. Extension With Contributions

• Account holders can choose to extend their PPF account for a block of 5 years with further contributions. Withdrawals during this extended period are limited to once per year, up to 60% of the balance at the start of the extension period.

4. Premature Closure Rules

1. Conditions for Premature Closure
Premature closure of a PPF account is allowed after 5 years from the account’s opening date under specific conditions:

• For medical treatment of the account holder or their dependents in case of serious diseases.
• For higher education expenses of the account holder or their children.

2. Penalty on Premature Closure

• A penalty of 1% on the applicable interest rate is levied on premature closures.

5. Tax Implications

1. Tax-Free Returns

• Both the interest earned and the withdrawals from a PPF account are exempt from tax under Section 10(11) of the Income Tax Act.

2. Contributions

• Investments in a PPF account qualify for a tax deduction of up to ₹1.5 lakh per financial year under Section 80C.

6. Procedure for Withdrawal

1. For Partial Withdrawal

• Fill out Form C (PPF Withdrawal Form).
• Submit the form to the bank or post office where the account is held, along with the passbook.
• The bank or post office processes the request and disburses the amount.

2. For Complete Closure

• Fill out Form C for withdrawal upon maturity.
• Submit it along with the passbook and proof of identity.
• The bank or post office processes the request and transfers the amount to the account holder’s bank account.

3. For Premature Closure

• Fill out Form C, providing the necessary documentary proof for the reason (medical bills, admission letters, etc.).
• Submit the form along with the passbook to the respective institution.

FAQs

1. When can I make the first partial withdrawal from my PPF account?
You can make the first partial withdrawal after the completion of the 6th financial year, starting from the 7th financial year.

2. Is there a limit to the number of withdrawals I can make in a year?
Yes, only one partial withdrawal is allowed per financial year.

3. Can I withdraw my entire PPF balance before 15 years?
No, full withdrawal is only possible after the account matures in 15 years. However, premature closure is allowed under specific conditions after 5 years.

4. What happens if I do not withdraw my PPF balance after maturity?
If you do not withdraw the balance, the account is automatically extended for another 5 years without further contributions. The balance continues to earn interest during this period.

5. Are there any charges for premature closure of the PPF account?
Yes, a penalty of 1% on the applicable interest rate is deducted for premature closure.

6. Can I withdraw from my extended PPF account?
Yes, during the extension period, you can withdraw up to 60% of the balance at the start of the extension period, limited to one withdrawal per year.

7. Is there any tax on the amount withdrawn from a PPF account?
No, withdrawals from a PPF account are completely tax-free.

8. Can I use the PPF withdrawal amount for any purpose?
Yes, there are no restrictions on the use of the withdrawn amount.

9. What documents are needed for partial or complete withdrawal?
You need to submit Form C along with your passbook and proof of identity for processing the withdrawal.

10. How is the interest calculated on my PPF balance?
Interest is calculated monthly but credited annually. The applicable interest rate is announced by the government every quarter.

Disclaimer

PPF rules and regulations are subject to change as per government policies. Please consult with a financial advisor or verify with your bank or post office for the latest updates. Investments are subject to eligibility, and past performance is not indicative of future returns.