What is PPF Withdrawal Rules & Process

Given below are the types of withdrawal that are allowed under a PPF account:

Partial Withdrawal of PPF

Under the PPF scheme, you are eligible to partially withdraw a certain amount of money. However, in case you wish to opt for a partial PPF withdrawal, the below-mentioned points must be noted:

1. Partial withdrawal facility is available after the completion of 5 financial years from the date the PPF account was opened.
2. You can withdraw up to 50% of the balance that is available after the completion of the fourth financial year.
3. Only one partial withdrawal is allowed in a financial year.
4. Individuals must submit the passbook along with the application form.
5. Only after the bank or post office verifies all details will partial withdrawal be allowed.
6. The amount that is withdrawn is tax-exempt.

PPF complete withdrawal

As per the PPF rules, you can withdraw the PPF amount after the completion of the lock-in period of 15 years. Once the 15 years PPF lock-in period is completed, you can close the account by withdrawing the entire contribution made towards the account along with the interest that has been generated.

Withdrawal of PPF amount due to an automatic extension

After the completion of 15 years, you will be able to extend the PPF account by 1 or more blocks. Each block consists of a period of 5 years. In case you do not withdraw the PPF amount or close the account, it will get automatically extended. However, interest will be generated on the total amount that has been accumulated in the account.

Withdrawal of PPF amount after a simple extension

After the extension of the PPF account, you will be able to withdraw the amount that was available in the account at the time of maturity. You will also be able to make only one withdrawal in a financial year.

Extension of PPF account by making contributions

Under the PPF scheme, you are allowed to extend the PPF account with contributions. By extending the PPF account, you are allowed to make contributions and interest will be generated on the contributions made towards the account as well.

However, you will have to submit the application form (Form H) at least 1 year before the maturity of the account in order to extend the account with contributions. In case you do not submit Form H, no further contributions can be made. In case you do make contributions, the account will be considered as irregular and no tax benefits can be availed under Section 80C of the Income Tax Act.

Withdrawal of PPF amount after extension with contributions

Once you have extended the account and started making contributions, up to 60% of the balance that was accumulated at the time of extending the account can be withdrawn. However, only one withdrawal is allowed in a financial year.

Premature closure of PPF Account

You will be able to opt for premature closure only after the completion of 5 financial years. However, premature closure is allowed only under the below-mentioned grounds:

1. In case the account holder, his/her spouse, or children are suffering from a serious disease or require treatment for a life-threatening ailment.
2. Premature closure is also allowed to pay for a child's higher education. However, documents that confirm the admission of the child at the university or college must be submitted.

However, a 1% penalty is levied from the actual rate of interest that was given by the account. For example, if the individual was earning an interest of 8.5% on the contributions that are being made, in case he/she closes the PPF account prematurely, the rate of interest will be reduced to 7.5%.

Process to withdraw the PPF amount

In case you wish to withdraw the PPF amount completely or partially, you must submit Form C at the relevant bank or PPF post office.

Given below are the three sections that are present in Form C :

1. Declaration section: Under this section, you will need to give details of the PPF account number and the reason for the withdrawal of the PPF amount. You will also need to give details about the number of years the account has been open.
2. The office use section: Under this section, the below details are present:
   1. Date and the signature of the person who is in charge.
   2. The total amount of money that can be withdrawn.
   3. Total amount of money that is available in the account.
   4. Date by which the previously requested withdrawal was allowed.
   5. Total balance that is available in the PPF account.
   6. The date when the account was opened.
3. Bank details section: Under this section, the details of the bank where the amount must be credited to needs to be filled. Details of the cheque or demand draft that is being issued can also be filled in this section.
4. In case the account holder is a minor, he/she must be alive, and details of the minor must be submitted.
5. The bank or office will do a thorough verification before processing the withdrawal request.

Withdrawals by Non-resident Indians (NRIs)

NRIs are not allowed to open a PPF account. However, in case the account was opened before the individuals became NRIs, it will have to be continued until maturity. After maturity, the amount available in the account must be withdrawn and the account will have to be closed. PPF account for NRIs are not allowed to be extended.

PPF Tax benefits

Under Section 80C of the Income Tax Act, tax benefits are provided for withdrawals made from a PPF account. PPF Tax benefits are provided for complete and partial withdrawals.