Due to its high guaranteed returns and tax perks, the Public Provident Fund (PPF) is one of India’s most popular government-backed savings plans. The PPF account has a 15-year maturity term after which you can opt to withdraw funds. But how do you withdraw it and what are the rules to withdraw public funds?
In this article, let’s explore what is a PPF account? How to open the PPF account? What are the PPF withdrawal rules? What are premature PPF withdrawal rules and how does a PPF calculator help? Let’s get started!
What is a PPF Account?
The Public Provident Fund (PPF) was established in India in 1968 with the goal of mobilizing modest savings through investment and earning a return. A PPF account or a Public Provident Fund (PPF) scheme is a long-term investment option that pays a competitive rate of interest and returns on the money deposited.
The interest and returns earned are not taxable under the Income Tax Act. Under this plan, one must register a PPF account, and the amount contributed during the year can be claimed as a deduction under section 80C of the income tax act.
How to Open your PPF Account
A PPF account can be opened at any National bank or Post Office, such as the State Bank of India or Punjab National Bank, among others. Even private banks, like ICICI, HDFC, and Axis Bank, are now permitted to provide this service.
- You must submit a completed application form together with the relevant documents, such as identity proof, address proof, and signature proof, as well as the KYC paperwork
- Following the submission of these papers, you must make a deposit to begin the account opening process
The PPF rate stands at 7.1% at present, with a lock-in of 15 years. However, after completing six years, there is an opportunity to withdraw money from the beginning of the seventh year.
A PPF calculator helps determine the growth of one’s PPF fund.
How Does An Online PPF Calculator Work?
As you may already know, the interest one earns on PPF is compounded annually and as a newbie, it may get rather tedious for you to determine the maturity amount manually. A PPF calculator, however, does it for you in a matter of a few clicks. All you need to do is open an online PPF calculator, enter the annual investment amount, and then the duration of the investment.
The PPF calculator will then determine an estimated maturity amount, depending on the prevailing rate of interest. The calculator uses the following formula for the calculation of the maturity value is:
A = P [({(1+i) ^n}-1)/i]
- A is the amount at maturity
- P is the principal amount to invest in the PPF account
- I is the interest rate on the PPF scheme
- N is the duration for which you are investing in the PPF scheme
PPF Withdrawal Rules
Generally, an account holder can withdraw the whole amount of a PPF account only after the account reaches maturity, which is after 15 years from the date of opening. After 15 years, an account holder’s full balance in the PPF account, including accumulated interest, can be withdrawn freely and the account closed.
At the time of withdrawal, investors can make use of a PPF calculator which simplifies the process to provide an estimate of interest earned as well as maturity value for a given amount in a given period of time.
Partial Or Premature PPF Withdrawal Rules
Premature or partial withdrawals from PPF are permitted after a period of five years from the end of the year in which the original investment was made. This implies that if you opened your PPF account in January 2010, you can start to make partial withdrawals in the 2015-16 financial year.
Mentioned below are the important partial or premature PPF withdrawal rules-
- Partial or premature withdrawals are permitted from the sixth financial year after the account is created. For example, if the account was created on March 1, 2020, withdrawals will be permitted from the beginning of the 2025-26 financial year.
- Partial or premature withdrawals from the PPF account are tax-free.
- Only one partial or premature withdrawal is permitted in a financial year.
What Is The Maximum Amount Which Can Be Withdrawn In A Partial Withdrawal Or Premature PPF Withdrawal?
A PPF investor cannot withdraw the whole balance of a PPF account at once. The lesser of the following amounts is the maximum amount that can be withdrawn each financial year:
- 50 percent of the account balance at the end of the previous financial year
- 50 percent of the account balance at the end of the fourth financial year, before the current year
Closing Thoughts: How To Withdraw Partial Amount From PPF Account?
To withdraw a partial amount from the PPF account, you must submit Form C which must include information such as account number and amount to be withdrawn. If the account is in the name of a minor, an extra declaration should be made declaring that the funds are necessary for the benefit of a minor kid who is presently a minor and still alive.
Mentioned below are the steps which you need to follow to withdraw a partial or premature amount from a PPF account.
Step 1- The PPF Withdrawal Form (Form C) can be downloaded from your bank’s website or obtained from a bank branch. The PPF withdrawal form is divided into three sections:
- Declaration Section- You must enter your PPF account number as well as the amount you intend to withdraw. Additionally, you must state how long the account has been active.
- Office Use Section– You must fill in information such as the account’s opening date, current total balance, previous withdrawal date, and total withdrawal amount.
- Bank Details Section– Number of the bank account in which the withdrawn funds should be credited, and other details should be mentioned.
Step 2– With Form C, attach a copy of your PPF passbook.
Step3- Submit Form C and passbook to your local bank branch.
The bank or PO will process and release the money if all of the information and documentation you have provided are acceptable. You can have the money deposited into your savings account or you can receive a demand draft for it.
FAQS
- 1. What is the present interest rate on PPF?
The present interest rate on PPF is 7.1%.Every year, the Finance Ministry fixes the interest rate, which is payable on March 31st. The interest is determined on the lowest balance between the end of the fifth day and the last day of each month.
- 2. What are the risks involved in PPF?
PPF offers guaranteed, risk-free profits as well as total capital protection because it is supported by the Indian government. Therefore the risks associated with owning a PPF account are very low.
- 3. Who is eligible to open a PPF account?
A PPF account can be opened by any adult Indian resident. A legal guardian can create an account on behalf of a minor or a person with a mental disability. Each citizen may only have one PPF account except if the second account is in a minor’s name.