After completion of 15 years, the PPF account may still be extended. Here are the rules to be followed during the extension.
For most PPF account holders who have religiously continued it over the last several years, it remains a one-of-its-kind investment. With income tax benefit on the contributions made, tax-free income, and carrying the highest safety of principal invested, PPF has been a popular choice even amongst the salaried individuals.
No matter on which date one opens the account, the maturity of the PPF account happens on the expiry of 15 years from the end of the year in which the initial subscription was made into the account. For example, if the account is opened on January 23, 2003, the 15 years will get completed on March 31, 2018 and therefore one can withdraw the entire balance anytime after April 1, 2018.
But, what if one doesn’t want to withdraw the entire balance? PPF, after all, brings out the best of the principle of compounding in the way it works.
Therefore, after completion of 15 years, PPF rules allow the account to be extended indefinitely in a block of five years. During the extended period, you may still make partial withdrawals and not necessarily make any contributions.
So, before withdrawing on maturity, know the PPF rules that may be of help to you. After completing 15 years, one has two options:
(i) Either to extend the PPF account with fresh contributions, or
(ii) Extend the PPF account with no fresh contributions
1. PPF account extension with fresh contributions
The minimum contribution in PPF is Rs 500. To continue PPF account with fresh contributions, it requires one to intimate the post office/bank by submitting the Form H. Here’s a copy of the Form H that can be used by SBI’s PPF account holders. Without submitting this form, the deposits made into the account will be treated as irregular and no interest will be paid on the fresh contributions. Also, no tax benefit under section 80 C can be availed if the form is not submitted and yet contributions are made. Importantly, Form H need not be submitted during each extension but only during the initial extension.
Partial withdrawals: During the extended period, one is allowed to withdraw a maximum of 60 per cent of the balance at the start of each extended period. This partial withdrawal can be made anytime but only once during each year of the extended period. Here’s a copy of the Form C that can be used by SBI’s PPF account holders.
2. PPF account extension with no fresh contributions
For continuing the PPF account without contributing any fresh contributions, one need not intimate the post office by submitting any form. The balance will continue to earn interest rate as per what the government declares.
Partial withdrawals: As no fresh contributions have been committed, during the extended period, one can make any amount of partial withdrawal, however, in one year only one such partial withdrawal will be provided.
After the completion of 15 years, the account holder has to intimate the post office within one year whether to continue with deposits or not. After a year, one will have to withdraw full balance or extend the account without fresh contributions.
What to do
To extend or not to extend the PPF account after maturity may not have a straight forward answer. However, considering things like tax-free interest and sovereign safety of the corpus, one may consider extending the account unless a big-ticket expense was planned using the funds. Those who have still got a few years to retire have all the more reason to extend the PPF account and continue reaping the benefit of tax-free compounding.