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PPF Closure Formalities
A PPF account can be permanently closed only in case of the death of the account holder, in case the account has not been matured by then. However, a premature closing request can be placed by the owner by submitting a simple form duly signed by the account holder with proper reason for withdrawal.
The entire amount in PPF account can only be withdrawn at the time of maturity. In case an investor is facing a financial crisis, then partial withdrawals are allowed subject to a certain ceiling limit. You can withdraw once a year from the 7th year from the date of opening PPF account. The withdrawals cannot exceed more than 50% of the balance at the end of the 4th year or 50% of the balance at the end of the preceding year, whichever is lower.
Example: the account that was opened in January 2019 will be eligible for partial withdrawals from 1st April 2024. The amount of withdrawal is limited to 50% of the balance that is standing to his credit on 30th March 2021 or as on 31st March 2024, whichever is lower.
Normally, you have to wait up to 15 years for PPF account closure. However, in certain circumstances, you can close it prematurely. You should also know that It is not necessary to close a PPF account after 15 years. You can continue it with relaxed rules.
Closure Request Post Maturity
A PPF account matures in 15 years and you are free to withdraw the whole corpus after this duration. With the full withdrawal, your PPF account closes. This rule applies to SBI, ICICI and other banks as well.
The 15-year period is calculated from the end of the financial year in which you have opened the account. For instance, if you have opened the PPF Account in October 2019, it would mature on 31st March 2035. The 15 years would be counted from 31st March 2020. It would be the last day of the financial year 2019-20. Note, if you have opened PPF account before the 5th April, the duration would be counted from the just-finished previous financial year.
When the PPF account matures, you would have 2 options.
Full balance withdrawal and Account closure - Once your account matures, you can visit the Bank and apply for full PPF balance withdrawal. You must apply for withdrawal within one year of maturity.
Partial or No Withdrawal and extend the account for the next 5 years - You have the choice of extending your PPF account after the maturity. The extension would be for 5 years. After the 5 years, you have to again decide between the full withdrawal and extension.
Reason for Withdrawal or Closure before Maturity
The Government has listed three reasons for closing the PPF account before the maturity. The requirements can be for the family members (spouse or dependent children or parents) as well.
- Medical Emergency
- Higher Education
- Death of account holder (It existed earlier)
Preconditions:
- For the premature closure of PPF account, it should be at least 5 years old. Before that, you can only take a PPF loan.
- If you withdraw prematurely, the interest would be 1% less. The reduced interest rate would be applicable from the beginning. For that, the recalculation would be done.
PPF Account Closure Formalities for NRI
An NRI can’t Open a PPF account. However, if a person has opened the PPF account before becoming NRI then the following points are applicable:
- An NRI can keep his account till the maturity.
- An extension is not allowed for NRI.
- Once a person becomes NRI, he/she can’t contribute to the account.
- The PPF Account would keep earning interest till the maturity.
- If an NRI does not withdraw the balance after maturity, the amount would earn the interest of a saving account.
About PPF
PPF Account is a long-term saving scheme which gives all-round tax benefit. It is a preferred investment option since it is backed by the Government of India and comes with an attractive interest rate and guaranteed returns. These returns are entirely exempt from tax under Section 80C of the Income Tax Act. Investors can save tax ranging from Rs. 500 to Rs. 1,50,000 in a given financial year, and can get facilities such as loan, withdrawal, and extension of account.
Closing a PPF account is not straightforward. The government has put some restriction on withdrawals and PPF Account Closure. The rules are same whether you have opened a PPF account in the post office, SBI, ICICI or any other bank.
FAQs
1. How do I close PPF account online?
There are many banks which give you the online access the PPF account. You can see statement and deposit into the PPF account online. But PPF account opening and closing require the visit to branch or post office. The bank or post would match your signature. Only after the authentication, it would release the fund.
2. Is there a separate PPF closure form?
You are not required to submit a form for the account closure. Once, your PPF account becomes vacant the account closes itself. Thus, the PPF withdrawal Form can be considered as the PPF account closure form. Note, your PPF account would not close unless you withdraw the full amount.
3. Can a person have 2 PPF accounts?
No, one person cannot have 2 PPF accounts. However, a family is eligible to have multiple PPF accounts, a parent or guardian of the family can have individual accounts of their own and one of them can also open a PPF for a minor child (if they have any).
4. What is the PPF lock-in period?
Investments made to a PPF account have a lock-in period of 15 years. However, individuals can make a partial withdrawal from the PPF account after 5 years from the date of opening the account.
5. Can I withdraw PPF after 5 years?
The Government has amended the PPF scheme and propagated some positive changes regarding the withdrawal of balance from the account. You can now withdraw the whole amount and close your PPF after 5-years.
End Note
The PPF account matures after a term of 15 years. You can withdraw from the PPF account after it matures 15 years from account opening. You can also make partial withdrawals, after the end of 6th financial year from account opening. You can go for premature closure after 5 financial years, on specific medical and educational grounds.