PPF Withdrawal Rules & Premature Closure - A Complete Guide

The PPF withdrawal rules allow you to withdraw a part of your PPF balance after an initial lock-in phase. PPF closure is also permitted if you need the full amount in case of medical emergencies, higher education needs, or residency changes. This way, you can access your savings through PPF withdrawal options before maturity.

18,815 Views | Updated on: May 05, 2025

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The Public Provident Fund is a trusted government-backed savings scheme that balances long-term wealth creation with the benefit of flexibility. From partial PPF withdrawal to complete account closure options, the scheme offers various ways to tap into savings during emergencies, education needs, or significant life changes. These PPF withdrawal rules complement the scheme’s core advantages of guaranteed returns and tax benefits, making it a comprehensive financial planning tool.

Rules of PPF Withdrawal

Let’s say you invest ₹1,00,000 in a PPF account with the goal of growing your savings over a long period. But what if you encounter a financial need before the term ends? Understanding the PPF withdrawal rules will guide you on how to withdraw money from PPF account and deal with such a situation.

Lock-In Period

First of all, you should note that the PPF investment scheme has a lock-in period of 15 years. You can apply for the closure of the account and withdraw the entire corpus after 15 years by submitting a Form-9 to the bank or post office branch. No fine will accrue in such a case.

Partial Withdrawal

Before the maturity, you can withdraw a partial sum from the account. This is possible only six years from the date of account opening. You can withdraw up to 50% of your PPF balance, but it is based on the lower of these two amounts: either the balance at the end of the fourth year before the withdrawal or the balance from the previous year.

Frequency of Withdrawals

You can make a premature withdrawal of PPF balance once per financial year, subject to the aforementioned conditions. The withdrawal should be made in multiples of ₹50, and you must specify the purpose for which the withdrawal is being made.

Premature Closure

You can close a PPF account early, but only in certain cases like medical emergencies or to pay for higher education. This is allowed after completing five years from the end of the year in which the account was opened. However, a penalty is levied, and the interest rate applicable for premature closure is lower than the normal rate.

Loan Against PPF

You can also borrow a sum against your PPF account balance from the third to the sixth financial year. The maximum loan amount is limited to 25% of the balance in your account at the end of the second financial year. The interest rate on such loans is usually 1% higher than the prevailing PPF interest rate.

Extension of PPF Account

Upon maturity, you can extend the PPF account and avail of its benefits in blocks of five years. During this extended period, withdrawals are permitted without any restrictions, and the balance continues to earn interest.

Premature Closure of a PPF Account

As discussed, despite being a long-term investment, the PPF scheme allows you to close the PPF account before the maturity period. You can do so by submitting an application to the designated accounts office under the following circumstances:

Disease

Premature closure of PPF account is allowed if you, your spouse, dependent children, or parents are diagnosed with a life-threatening disease. You must provide supporting documents and medical reports confirming the illness from the treating medical authority.

Higher Education

You can request premature closure if you or your dependent children are pursuing higher education. Documentation, such as admission confirmation from a recognized institute of higher education, along with fee bills, is required.

Change in Residency Status

If your residency status changes, you can close the PPF account before maturity. Proof of such a change, such as a copy of the passport and visa or income tax return, must be submitted.

However, it is important to note that premature closure of a PPF account is subject to certain conditions:

The account cannot be closed before the completion of five years from the end of the year in which it was opened.
Upon premature closure, the interest rate applicable will be lower by 1% compared to the rate at which interest has been credited to the account since its opening or extension, as applicable.
These regulations are in place to ensure that premature closure is only permitted under genuine circumstances and to discourage early withdrawal of funds from the PPF account.
Account holders are encouraged to carefully consider the implications of premature closure on their long-term financial goals before making such a request.

PPF Partial Withdrawal Process

Once you decide to withdraw funds from your PPF account, you should check if the specified period has lapsed. Further, if you have any outstanding loan against the PPF account, you should repay it along with interest. You can then study the following information regarding how to withdraw PPF amount:

Obtain Form-3 from your bank or post-office branch. You can also download the form from the financial institution’s official website.
Fill the three sections of the form with the following details:

Declaration Section: PPF account number, the withdrawal amount, and the duration for which the account has been active.

Office Use Section: Account opening date, current balance, date of previous withdrawal (if any), total withdrawal amount, etc.

Payment Details Section: Bank account number, cheque or demand draft number, etc.

Submit the form along with the passbook to the respective branch. The bank/post office will then process your request and credit the amount to your savings account or through a demand draft.

Tax Benefits on PPF

The above-discussed withdrawal and premature closure guidelines have contributed to the high adoption rates of the PPF scheme. Another factor that makes this scheme a favorite among citizens is its tax benefits. The PPF scheme is included in the EEE (Exempt-Exempt-Exempt) category of investments under tax laws. This means that:

Your PPF contributions are exempt under Section 80C up to ₹1,50,000 per financial year. For instance, you invest ₹1,00,000 in the PPF account in FY2024-25. You can deduct this investment amount from your taxable income and reduce your tax liability for that year.
You will earn interest at 7.1% per annum under the PPF scheme. This interest is also exempted from tax under Section 10 of the Income Tax Act.
When you receive the maturity amount after 15 years, that too will be exempt from tax under Section 80C. Even the partial withdrawal amount is tax-exempt.

Final Thoughts

The flexibility of PPF withdrawal rules, combined with its triple tax benefits, makes it a versatile financial tool that can adapt to life's changing circumstances. While the scheme offers various withdrawal options, it is prudent to view them as safety nets rather than regular financial planning tools. The true power of PPF lies in letting compound interest work its magic over the full 15-year tenure. Before making any withdrawals, consider alternatives like taking a loan against your PPF balance. If you must withdraw, try to limit it to genuine emergencies or high-return opportunities like education. Remember, the discipline of regular PPF contributions, coupled with minimal withdrawals, can help create a substantial corpus that provides financial security for you and your family.

FAQs on PPF Withdrawal Rules

Can I withdraw money from my PPF account before the completion of 15 years?

Yes, partial withdrawals are allowed after the completion of six financial years from the date of opening the account, subject to certain conditions.

What are the penalties for premature closure of a PPF account?

Premature closure incurs penalties, and the interest rate applicable is lower than the standard rate. It is advisable to consider these implications before opting for premature closure.

Is there a limit on the frequency of withdrawals from a PPF account?

Yes, withdrawals can be made once per financial year. However, there are no restrictions on the number of withdrawals during the extended period after maturity.

Are withdrawals from a PPF account taxable?

No, withdrawals from a PPF account are tax-free. However, it is essential to ensure compliance with prescribed limits to avoid potential tax implications.

PPF Withdrawal Rules & Premature Closure - A Complete Guide

Rules of PPF Withdrawal

Lock-In Period

Partial Withdrawal

Frequency of Withdrawals

Premature Closure

Loan Against PPF

Extension of PPF Account

Premature Closure of a PPF Account

Disease

Higher Education

Change in Residency Status

PPF Partial Withdrawal Process

Tax Benefits on PPF

Final Thoughts

FAQs on PPF Withdrawal Rules

Can I withdraw money from my PPF account before the completion of 15 years?

What are the penalties for premature closure of a PPF account?

Is there a limit on the frequency of withdrawals from a PPF account?

Are withdrawals from a PPF account taxable?

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