The Public Provident Fund or PPF was launched in 1968 in India where the financial landscape was vastly different from the market forces that shape the country’s economic destiny now. It was launched with all the trappings that endeared it to the common people down generations – a high interest rate, complete income tax exemption on principal, interest, maturity and a sovereign guarantee.
Early withdrawal under specific conditions
Though it was and still is discouraged, early withdrawal from the PPF account is permitted under certain circumstances. The PPF is designed for very long-term investments – the maturity period is 15 years. But any investor can stretch it in multiples of 5 years. In effect, one can even keep investing in it for decades.
Still, keeping in mind exigencies that an investor might face, one can make partial PPF withdrawals, but after 6 years from opening the account. According to rules, one cannot take out more than 50% of the accumulated corpus in the fund at the end of the fourth year from the date of account opening.
Early closure possible too
Also, an investor can even close the account after at least five years have passed from the date of opening the account and claim the accumulated funds. But this can be done in case of exigencies such as meeting medical treatment or educational expenditure.
After 15 years one can withdraw the entire corpus with the entire amount being free from Income Tax.
Exempt from income tax
Since PPF comes under the Exempt-Exempt-Exempt category of investments, all withdrawals – either on maturity or before the 15-year-period – are exempt from income tax.
No online closure
However, one cannot make early withdrawals and close the PPF account online. An investor has to apply according to a specified format for this purpose. One can download a particular form for withdrawal, fill it up and deposit it with the bank or post office where the PPF account has been opened. One must not forget that the PPF account passbook has to be deposited with the application for early closure of the account.
PPF currently bears an interest rate of 7.1% that comes up for quarterly review by the Finance Ministry.
Though the Public Provident Fund was designed essentially as a long-term investment instrument, it has provisions for early withdrawal though within certain limits. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
