What should you do with your PPF account once it matures?
PPF account matures after 15 years. After this, you get three options & each option has some rules. Let’s discuss them in detail to determine which’s best for you.
1) CLOSE THE ACCOUNT & WITHDRAW THE MONEY
Once the initial block of 15 years is complete, you can close the account and receive the full amount, that too tax-free. If you wish to invest again in PPF, you must open a new account.
2) EXTEND WITHOUT ANY CONTRIBUTION
In this case, your account’s maturity extends by 5 years & you continue to earn interest without making any fresh contributions.
What if you need some money during these five years?
You can withdraw any amount during this period. And the balance amount will continue to earn interest. But there’s a catch. You can make only one such withdrawal per financial year. Let’s understand this with an example.
Say, at maturity, your PPF account has Rs 1 crore. You extend it for five more years. After two years, the balance is nearly Rs 1.15 crore (assuming 7.1% interest). You can withdraw any amount lower than this sum once a year. So, you have complete flexibility.
3) EXTEND FOR 5 YEARS (WITH CONTRIBUTION)
This one is a bit complicated.
You must submit an application called ‘Form H’ to either the Post Office or the bank where you have the PPF account. You must submit the application within one year after the account matures.
For example, say the account matured on 1st April 2022. You must exercise this option by 31st March 2023. Otherwise, the second option will be activated by default. Once you submit the form, the PPF account will further extend for a block of 5 years.
What will happen if you don’t opt for this option but continue contributing as usual?
The bank will treat it as ‘irregular’ and refund the money immediately. So, you don’t earn interest and won’t get Sec 80C tax benefits either.
What about making withdrawals during this five-year period?
You can withdraw a maximum of 60% of the account balance prevailing at the start of the five-year extension period.
Let’s say your PPF has Rs 20 lakh on maturity. You extend it with contributions. You can withdraw a maximum of Rs 12 lakh (i.e., 60% of Rs 20 lakh).
You can withdraw this Rs 12 lakh in one go or in parts. But only one withdrawal is allowed in each financial year.
Which option is the best?
It depends on your needs. Generally speaking, it's best to extend if you do not have the entire PPF account balance requirement in one go. With or without contributions is a call that you need to take based on your cash flow.
