PPF (Public Provident fund) is one of the most popular savings schemes in India to build a retirement corpus. It's one of the most tax-efficient savings products available to all citizens. PPF investments up to Rs. 1.5 lakhs are eligible for tax deduction under Section 80C, and the amount received on maturity is tax-exempted. The interest earned is also tax-free.
Small savings, guaranteed and risk-free returns make PPF one of the most sought-after investment schemes.
PPF accounts come with a lock-in period of 15 years. Many investors do not know that it can be extended at the end of the maturity period. Financial planners recommend that you continue renewing your PPF account in five-year blocks if you do not have an immediate need for funds at the end of 15 years.
Here, in this guide, we explore all that you need to know about extending or renewing your PPF account on maturity.
What are the options available when a PPF account matures?
Here are the three options available to investors at the end of the maturity period.
Option #1: Close the account and withdraw funds entirely
A PPF account matures after 15 financial years from the end of the year, in which it was opened. Let's say that you opened a PPF account in May 2005. The year of opening is considered as 31st March 2006 (the end of the fiscal year, in which the account was opened). Now calculating 15 years from 2006, the PPF account matures on 1st April 2021.
Withdrawals: To close the account, inform the post office (or bank) where the account is held. The entire proceeds, including principal and interest, are credited into your linked bank account.
Option #2: Extend the account without making any fresh contributions
You have the option to retain your PPF account after maturity without making any new contributions. In this case, the amount in the account will continue earning interests until the day you close it. Extensions are allowed indefinitely, in five-year blocks. There is no limit on the number of times you can extend the account. However, note that you cannot make any more contributions to your account once you choose this option, even if you desire.
Partial Withdrawals: You are allowed to make one withdrawal once every financial year. There is no limit on the amount you can withdraw. The remaining balance in the account continues to earn interest. Note that only ONE withdrawal is allowed every fiscal year.
Option #3: Extend the account with fresh contributions
You also have the option to continue your PPF account with contributions after maturity. However, to avail of this option, you have to submit Form H to the post office (or bank) within one year from the date of maturity.
If you do not submit the Form H, but continue to make contributions to the PPF account, all deposits made after maturity are considered irregular. These deposits do not earn any interest and are not eligible for tax deductions under Section 80C of the ITA.
Partial Withdrawals: If you have opted for an extension with a contribution, you are allowed only one partial withdrawal during the entire extension period of 5 years. The withdrawal limit must not exceed 60% of the total amount in your account at the beginning of the extension period. You can withdraw this amount in one instalment or in several instalments spread over five years.
Why and when should you consider extending the PPF account?
You can opt to extend the account if you do not have an immediate need for funds at the time of maturity. By doing so, the amount in the account continues to earn interest for the next five years.
If your retirement age is far away, it's better to extend the account. Let's say you opened a PPF account at the age of 30. It gets matured when you are 45. You can continue extending it three times so that the proceeds benefit you when you retire at the age of 60. Submit Form H to renew the account with contributions. This way, you can continue building your corpus while enjoying tax benefits as well.
Next, let’s see how to renew your account when it matures.
How to extend the PPF account when it matures?
Let’s see how to extend a PPF account in both ways – with new contributions and without further investments. Irrespective of which mode you choose, you have to make the decision within one year of maturity. If you do not close the PPF account within one year of maturity, then the account will be extended for the next five years without further contributions by default.
How to extend a PPF account without any new contributions?
If you wish to extend your PPF account without any new contributions, you don't have to do anything. This is the default choice, and your account goes into this mode when you don't withdraw the funds within one year of maturity.
How to extend a PPF account with new contributions?
You have to submit Form H to the post office (or bank) where the account is held within one year of maturity. The Form H expresses your intent to extend the account with contributions for a block of five years.
Extending PPF Account – FAQs
I have already extended my PPF account once. Can I extend it again?
Yes. You can keep on extending your account for a block of five years. There is no limit on the number of times you can extend.
When is the time to renew a PPF account?
You can decide whether you want to extend or not at the end of 15 years from the commencement of the account. This is when the account matures. You have to make the decision within one year after maturity.
Can I transfer my PPF account from one post office to another bank/post office?
Yes. To enable the transfer, you have to first approach the post office/bank where your account is held and submit an application for transfer. Once the application is processed, the existing bank/post office sends the documents to the new branch, along with a cheque, for the outstanding balance held in the account.
To Extend or Not to Extend
Extending the PPF account on maturity will help your funds continue earning interests. Unless you have a big-ticket expense planned on maturity, you can opt to renew the funds. Use any one of the options listed here and continue reaping your PPF account benefits, even after 15 years of investing.