Public provident fund or PPF remains one of the most popular savings options for the long term despite a gradual decline in interest rates over the years. PPF accounts have a maturity period of 15 years and they can be extended. If there is no fund requirement, financial planners say, PPF account holders should extend the account beyond 15 years. In terms of income tax implications, PPF accounts enjoy the benefit of EEE (exempt-exempt-exempt) status. Under Section 80C, contribution up to Rs 1.5 lakh in a financial year qualifies for income tax deduction. The interest earned and maturity proceeds are also tax free.
What are your options when a PPF account matures?
1) A PPF account can be closed after the expiry of 15 financial years from the end of the year in which the account was opened.
2) The subscriber can retain his/her PPF account after maturity without making any further deposits for any period without limit.
3) The balance in the account will continue to earn interest till it is closed.
4) The subscriber can make one withdrawal of any amount in each financial year.
5) If the subscriber wants to make further contributions after the PPF account matures, it can be extended in blocks of five years.
6) There is no limit on the number of times you can extend the PPF account.
7) But if the PPF account holder wants to continue with the contribution-mode after maturity, he/she has to submit Form H within one year from the date of maturity of the account.
8) If the subscriber fails to submit Form H but continues to make deposits in the account, the fresh deposits into PPF account will not earn any interest.
9) Also, in this case, the fresh deposits in the PPF account will not be eligible for deduction under Section 80C of the Income Tax Act.
10) In case the person has opted to extend his account by a block of five years, during each block period he/she can make one withdrawal not exceeding 60% of the balance at the commencement of each block. This amount can be withdrawn either in one installment (one year) or in more than one installment in different years, not exceeding one withdrawal in a year.