The public provident fund (PPF) is a well-liked retirement financial savings possibility for a lot of people, salaried or in any other case. The price of curiosity on the PPF, which is reviewed quarterly, has been saved unchanged at 7.1 per cent because the June 2020 quarter. It is a sexy and secure funding possibility, particularly given its ‘EEE’ standing.
Under the ‘exempt, exempt, exempt’ construction, your contributions into PPF are eligible for deduction underneath part 80C of the IT Act. The curiosity earned on these contributions and the maturity quantity too are tax-exempt. PPF comes with a minimal lock-in of 15 years, thereby guaranteeing that your contributions compound and develop right into a sizeable corpus over time. So, dip into your PPF corpus solely whether it is completely essential to take action and in case you have exhausted all different choices.
So, what are the principles regarding untimely withdrawal from or closure of PPF?
A PPF account matures after 15 years from the 12 months of account opening. You could make untimely partial withdrawals or shut the account prematurely – any time after 5 years from the tip of the monetary 12 months by which the account was opened. Suppose you opened a PPF account in January 2018, that’s, in FY 2018. Then, you’ll be able to prematurely withdraw from or shut your account solely after 5 years from the tip of FY 2018 (31 March 2018), that’s, from FY23 (after 31 March 2022).
Premature withdrawal
While a untimely withdrawal, not like an account closure, will be executed for any cause, there’s a restrict to such withdrawals. Your withdrawal quantity can’t exceed the decrease of the 2 – fifty per cent of the steadiness in your PPF account on the finish of the fourth 12 months previous the 12 months of withdrawal or on the finish of the instantly previous 12 months. Also, a withdrawal will be made solely as soon as in a monetary 12 months. So, for instance, if you wish to make a withdrawal in August 2022 (FY 2023), then the utmost that you could withdraw is 50 per cent of the decrease of the account steadiness as of 31 March 2019 and 31 March 2022.
Premature closure
Unlike a untimely withdrawal, a untimely closure is allowed just for particular causes resembling remedy of life-threatening illness for the account holder, partner or dependent kids or dad and mom. Expenses on greater schooling of the account holder, or dependent kids in a recognised institute of upper schooling or change within the residency standing of the account holder. Such request needs to be backed by supporting paperwork.
In case of untimely closure, your account will earn one share level decrease than the relevant price. The decrease price will apply for your entire interval – from the account opening date until the closure date. Partial withdrawals or a full withdrawal on untimely account closure aren’t taxed.
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