The term of this account is 15 years. Can it be closed before the term, i.e. within two years of opening? Let’s find out more about it.
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Public Provident Fund is a government-backed investment and tax-saving instrument. With the help of this, one can not only build up funds for post-retirement needs. Moreover, every year’s savings also provide tax relief. The tenure of this account is 15 years. Can it be closed before the tenure, i.e. within two years of opening? Let’s know more about it.
Before knowing whether PPF account can be closed prematurely, let us know the detailed information about PPF account. Public Provident Fund (PPF) is a long-term investment scheme available to all Indian citizens. It can be opened by children as well as adults. The tenure of PPF account is 15 years. After that, its assistance can be extended for a period of five years.
A minimum of Rs 500 and a maximum of Rs 1.5 lakh can be invested in this account in each financial year. This amount can be paid in a single installment or in a maximum of 12 installments during the year. A minimum of Rs 100 has to be paid while opening the account. If an amount exceeding Rs 1.5 lakh is deposited in the PPF account in a financial year, no interest is earned on it and no tax deduction is available. It is necessary to deposit money into the account at least once every year for 15 years after opening the account.
The most important benefit of a PPF account is that the interest earned in this account, as well as the amount received after the maturity of the account, is tax-free as per Section 80C of the Income Tax Act 1961. Currently, the interest rate of PPF is 7.1 percent. This interest is compounded. The interest rate is reviewed every three months. The interest rate may be lower or higher.
Can money be withdrawn before the maturity date?
The rules of PPF account are that the account can be closed only after completing 15 years and all the money can be withdrawn along with interest. Permission to withdraw some amount is given from the sixth financial year. Up to 50 percent of it can be withdrawn. If money is needed before six years, there is a loan facility. One year after opening the PPF account and till the end of the fifth financial year, one can avail the loan facility on the PPF account. Up to 25 percent of the total deposit can be taken as a loan.
If some special circumstances arise, the PPF account can be closed after five years. In case of premature closure, the money is returned after deducting one percent interest from the date of opening the account. Let’s see under which circumstances the account can be closed in this way.
- For emergency medical expenses of the account holder himself, wife or children
- For higher education of the account holder himself or his dependent children…
- If the account holder shifts abroad
- If the account holder passes away, the account is closed before maturity. The nominee or
heir is not allowed to continue the account. In such a situation, interest is paid up to the end of the month preceding the month of closure of the account.
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