PPF extension after it matures?
- OfferZoneDeals team
- Jun 23, 2023
- 4 min read
Updated: Jul 30, 2023
The Public Provident Fund (PPF) is a popular investment scheme in India known for its long-term savings benefits and tax advantages. A PPF account has a maturity period of 15 years, after which it can be extended in blocks of five years indefinitely. Extending your PPF account after it matures is a wise decision to continue enjoying the tax benefits and accumulate wealth over the long term. In this blog, we will guide you through the process of extending your PPF account after it reaches its maturity period.
Go back in time 15 years to the day you first opened your Public Provident Fund (PPF) account. It's time for your PPF account to mature after 15 long years of carefully contributing to the plan and enjoying compounding.
Even though PPF has a 15-year lock-in period, you have the opportunity to borrow money against it or make partial withdrawals while it is still in effect. But what about when it matures? What choices do you still have about your PPF account?
Here are three ways to handle the PPF account after it reaches maturity:
a) You have the option to close the account and take the entire profit.
b) The account may be extended without new deposits.
b) You can add new deposits to the account to extend it.
How to extend PPF account after it matures
A) Close the account and take the entire profit: Only when 15 years have passed after the end of the year in which the initial subscription was made into the account may a PPF account be closed.
Therefore, the maturity date of the PPF account will not be based on the date of opening. The account would mature on April 1, 2018, if it were created on May 18, 2002. This is because the end of the year when the account was opened will be March 31, 2003. To close, one has to intimate the Account Office (post office) and the entire balance standing at the credit will be paid.
Following the maturity of your PPF account, you have the choice to extend it. It can be extended in five-year increments indefinitely. You are not required to make new deposits throughout the extended term, and you may even make partial withdrawals, subject to certain conditions.
B) Account may be extended without new deposits: One need not notify the Account Office for such an extension as it will be automatically regarded extended if the PPF account is continued without new deposits. But keep in mind that no additional contributions will be accepted after then. For the following five years, the balance will continue to earn the applicable interest. During the extended time, you are only permitted to make one partial withdrawal every fiscal year. Any amount in the balance may be withdrawn once by the subscriber every fiscal year. The subscriber cannot choose to continue the account with deposits for a block term of five years once the account is continued without deposits for more than a year.
C) Add new deposits to the account to extend it: Before the end of the year, you must notify the Account Office in writing by filling out Form H if you wish to continue using the account and making new contributions. All future deposits will be viewed as irregular, and no interest will be paid on them, if one continues to deposit without providing this Form. After 15 years have passed without the account being continued, the advantages of Section 80 C of the Income Tax Act will no longer apply to deposits put into PPF accounts. Future extensions may not include new contributions after being started with fresh deposits, although the account will still collect interest throughout that time.
Partial withdrawals permitted during the extended period: If the account has been extended without contribution, the account holder may withdraw any amount within the balance once every fiscal year. The balance continues to earn interest.
However, if the account has been extended with a contribution, only one partial withdrawal is permitted during the extension period by submitting Form C, subject to the condition that the total of the withdrawals during the 5 year block period does not exceed 60% of the balance at the credit at the start of the extended period.
This sum can be withdrawn in one instalment (one year) or in multiple instalments over several years, depending on your needs. Similarly, during the second block term of 5 years, the subscriber can withdraw 60% of the total amount at credit at the start of the second block period in one year or in multiple years, with no more than one withdrawal per year. This withdrawal limit will apply at the start of each extension of a 5-year block period.
What you should do?
If the maturity of the PPF account is not close to your retirement age, then it's better to extend the account. So, if someone creates a PPF account at the age of 30, it can be extended three times until the age of 60 and beyond. It's better to submit Form H and then extend as it takes a minimum of Rs 500 a year to keep the account active. Even though 40% of your corpus will be locked in for the next five years, you can always make partial withdrawals and still receive the benefits of compounding on the balance.
Extending your PPF account after it matures is a straightforward process that allows you to continue availing the benefits of this tax-efficient savings scheme. By following the steps mentioned above, you can ensure a smooth extension of your PPF account and make the most of its long-term wealth accumulation potential. Remember to stay informed about the latest rules and regulations regarding PPF accounts to maximize the benefits and secure your financial future.
Comments