The Public Provident Fund (PPF) is among the most popular long-term capital-generating saving strategies offered by banks. PPF enables you to make partial withdrawals before the end of the maturity tenure of 15 years. In some circumstances, premature withdrawal or exit can also be requested by the PPF account holder. PPF, however, has set some premature exit and partial withdrawal guidelines that you need to remember. Well, let’s look at it.
PPF guidelines applied for making a partial withdrawal
Generally, withdrawals are allowed within the maturity term of 15 years from the date of account issuance. However, partial withdrawals can be rendered at the completion of the sixth year of your PPF account from the date of account issuance. A member can also seek for premature exit from his / her PPF account in the case of emergency needs. From the beginning of the seventh financial year, the PPF also requires investors to make one withdrawal per annum. But the quantity that would be withdrawn would be less than:
- 50 per cent of the surplus subsequently following the withdrawal year at the completion of the fourth financial year.
- 50 per cent of the surplus at the end of the preceding year.
PPF guidelines applied for premature exit
Before the maturity date, the PPF account can also be revoked. A premature exit is allowed after five years from the end of the year in which the PPF account has been opened or before the date of maturity. There is a penalty of 1 per cent interest charge from the initial account opening date on premature exit. In scenarios with serious medical issues, the PPF account can be disabled or closed. In addition, a premature exit is also authorised in the event that an investor requires higher studies across the country or overseas.
Applicable tax on withdrawal
PPF withdrawals, either partly or in full, are exempted from tax. You are taxed on the revenue generated from them whenever you make bank deposits. Admittedly, post-tax returns on other instruments will decline significantly, rendering the PPF a good substitute for investment compared to other alternatives.