PPF account: How to extend PPF account after it matures; three options to consider

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Due to its appealing interest rates and tax advantages, the Public Provident Fund (PPF) has become extremely popular, especially among small savers. PPF deposits can be made for as little as Rs. 500 or as much as Rs. 1.5 lakh annually.PPF offers tax exemption under section 80C of the Income Tax Act and its returns are not taxable, PPF outperforms other investment options. Additionally, you can choose Loan Against PPF, which offers loans against your PPF balance at a competitive interest rate, while facing a financial emergency.You have the choice to borrow money against PPF or make partial withdrawals while it is still in effect, despite the fact that it has a 15-year lock-in term. But what about once it reaches maturity? What choices are available to you if you wish to keep using your PPF account?

Here are three alternatives to proceed with the PPF account once it matures:

a) Close the account and withdraw entire proceeds
b) Extend the account without fresh deposits
c) Extend the account with fresh deposits

Close the account and withdraw entire proceeds
A PPF account can only be cancelled after 15 years from the end of the year in which the original subscription was made. The entire corpus can be withdrawn once you reach maturity. You must submit a properly completed Form C at the bank branch or post office where you hold your PPF account in order to do this. Your bank account will then be credited with the corpus and the PPF will be cancelled. In some banks, Form 2 has taken the place of Form C.

Also read: How to add, change nominee in PPF account

Extend the account without fresh deposits
Following the maturity of your PPF account, you have the choice to extend it. It can be extended in five-year intervals indefinitely. You are not required to make new deposits throughout the extended term, and you can even make partial withdrawals, subject to certain conditions. But keep in mind that no additional contributions will be accepted after then. For the following five years, the balance will continue to earn the applicable interest.
During the extended time, you are only permitted to make one partial withdrawal every fiscal year. Any amount in the balance may be withdrawn once by the subscriber every fiscal year. The subscriber cannot choose to continue the account with deposits for a block term of five years once the account is continued without deposits for more than a year.

Extend the account with contribution

Before the end of the year, you must notify the Account Office in writing by filling out Form H if you wish to continue using the account and making new contributions. If one continues to deposit without submitting this Form, all further deposits will be treated as irregular and no interest will be paid on them. Deposits placed into PPF accounts after the 15-year window has passed without exercising the option to keep the account open will not be eligible for the tax benefits provided by Section 80 C of the Income Tax Act.

Partial withdrawals during extension period
If someone chose to extend their account without contributing, they are allowed to withdraw any amount in their balance once per fiscal year. Interest is still being paid on the balance.

However, if one decided to extend the account with a contribution, only one partial withdrawal is permitted during the extension period by submitting a Form C application, with the proviso that the total of the withdrawals made during the five-year block period cannot exceed 60% of the credit balance at the start of the extended period.

Depending on your needs, you can withdraw this amount in one instalment (one year) or in multiple instalments over several years. In a similar manner, during the second block period of five years, the subscriber may withdraw up to 60 percent of the total amount at credit at the start of the second block period, but not more than once every year. This withdrawal cap will take effect at the start of each 5-year block extension.

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