High lock-in period of PPF: How long does a nominee need to wait to get money?

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June 26, 2021 2:08 PM

Although PPF falls under the EEE (Exempt, Exempt, Exempt) category under income tax, it has the longest lock-in period among the tax-saving investment instruments.

income tax, public provident fund, PPF, tax-saving investment, higher interest rate than FD, sovereign guarantee, EEE category under income tax, lock-in periodWhile the lock-in period in PPF is 15 years, it provides liquidity in the form of loan and partial withdrawals.

Tax benefits on investments, interest and maturity make the Public Provident Fund (PPF) a preferred tax-saving investment. Moreover, apart from providing sovereign guarantee, the government also keeps the rate of interest on PPF higher than the prevailing FD rates, which makes it even more attractive.

Although PPF falls under the EEE (Exempt, Exempt, Exempt) category under income tax, it has the longest lock-in period among the tax-saving investment instruments.

While the lock-in period in PPF is 15 years, it provides liquidity in the form of loan and partial withdrawals. Loans against the PPF account are available after 3 years from opening an account and the partial withdrawal facility is available after 6 years of the account opening.

After the initial investment period of 15 years, PPF investors have the option of extending the period by a slab of 5 years without any cap on the number of extensions.

Investors may extend the period with further investments or without any investment. If the period is extended with contributions, lock-in will be applicable on the extended period as well. However, in case of extension without any contributions, there will be no lock-in period.

Public Provident Fund: How much cash can you deposit in a PPF account in a day?

After the death of a PPF Account holder, can a nominee continue the account or has to stop it?

“After the death of a PPF account holder, the nominee is not eligible to continue the PPF account for the remaining period. The balances can be claimed by filing Form G. In case there is no nomination, legal heirs can claim the balances. (Succession certificate is not required for balances less than Rs 1,00,000). The balance in the account of the deceased account holder shall earn interest till the end of the month preceding the month in which the eligible balance is paid to the nominee,” said Sudhakar Sethuraman, Partner, Deloitte India.

But, how long does the nominee have to wait due to the lock-in period in PPF?

Informing that there is no lock-in period for nominees, Sethuraman said, “If, for example, an investor dies within five years after opening a PPF account and making contributions in it, the nominee is not required to wait for ten years. On submitting Form G and successful verification by respective offices, the eligible balances will be remitted to the nominee. Interest will continue till the preceding month in which the eligible balance is paid to the nominee. Please note that the nominee cannot contribute to the PPF account.”

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