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What Should You Do With Your PPF Account Once It Matures?

A Public Provident Fund (PPF) account matures after 15 years. Once this initial block is complete, you are presented with three distinct options, each carrying specific rules and tax implications. Let’s break them down to help you make the best financial decision.

1. Close the Account & Withdraw the Corpus

Upon completion of the 15-year tenure, you have the right to close your account and withdraw the entire accumulated amount. This maturity amount is completely tax-free.

Note: If you withdraw the entire amount and later decide you want to invest in PPF again, you will be required to open a brand-new account from scratch.

2. Extend Without Any Fresh Contributions

You can choose to extend your account's maturity by a block of 5 years without making any new monetary contributions. Your existing balance will continue to earn the prevailing interest rate.

Withdrawal Rules: You maintain high liquidity during this extended period. You can withdraw any amount from your balance, with the restriction being a maximum of one withdrawal per financial year. The remaining balance continues to compound.

Example Scenario: Suppose your PPF account has ₹1 crore at maturity, and you extend it for five years without contributions. After two years, assuming a 7.1% interest rate, the balance grows to approximately ₹1.15 crore. You are permitted to withdraw any amount up to this sum once during that financial year.

3. Extend for 5 Years With Contributions

If you wish to keep building your corpus through active investments, you can extend the account in a 5-year block while continuing your annual deposits.

Action Required: You must submit an application known as 'Form H' to your post office or bank within one year of the maturity date. If you fail to submit this form by the deadline, Option 2 (extension without contribution) activates automatically.

Crucial Rule: If you do not submit Form H but continue making deposits, the bank will treat these deposits as 'irregular'. The money will be refunded immediately, meaning it will earn zero interest and will not qualify for Section 80C tax deductions.

Withdrawal Rules: Under this option, liquidity is restricted. During the entire 5-year extension block, you can only withdraw up to a maximum of 60% of the account balance that prevailed at the beginning of the extension period. This 60% can be withdrawn in one go or in parts, but you are still limited to one withdrawal per financial year.

Example Scenario: If your PPF balance is ₹20 lakh on maturity and you opt to extend with contributions, your maximum withdrawal limit for the next 5 years is ₹12 lakh (60% of ₹20 lakh).

Which Option is Best For You?

The ideal choice depends entirely on your current financial goals and cash flow needs. As a general rule of thumb, it is advisable to extend the account if you do not immediately require the entire maturity corpus. Whether you choose to extend with or without contributions should be determined by your capacity to continue making annual investments.