A Public Provident Fund (PPF) is a government-backed long-term savings scheme in India that offers tax benefits and earns interest on the deposited amount. It is commonly used for building long-term savings with assured returns.
A PPF account has a 15-year maturity period. However, this period is not counted from the exact date you open the account. Instead, it is calculated from the end of the financial year (31 March) in which the account was opened.
For example, if you open a PPF account in November 2011, the relevant financial year ends on 31 March 2012. The 15-year period is counted from that year-end, so the account matures on 1 April 2027.
After a PPF account matures, investors have the option to either withdraw their savings or continue using the account in blocks of five years. This can be done by either making fresh contributions between Rs 500 and Rs 1.5 lakh per financial year or simply allowing existing balance to earn interest.
While this is a general system of how PPF works, many investors can feel confused about what happens immediately after their account matures.
What Happens When You Don't Withdraw PPF Balance After Maturity?
After the 15-year maturity period, a PPF account holder can either withdraw the balance or extend the account. If you want to continue the account, you must submit Form 4 to your bank within one year from the date of maturity.
If no extension option is given within this one-year period, fresh deposits cannot be made into the account. Any deposit made after this period is treated as an irregular deposit and will be refunded by the bank without interest.
The existing balance, however, continues to earn interest at the applicable PPF rate until the account is closed. The account can continue under the applicable five-year extension rules and earn interest (currently set at 7.1% per annum).
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What If PPF Maturity Date Falls On A Holiday?
If your PPF maturity date falls on a weekend or bank or public holiday, the account continues to earn the applicable interest for that day. You can complete the withdrawal or extension process on the next working day. Even if you do not do so, you have until one year from the date of maturity to extend your account with fresh contributions by using Form 4. If you fail to do so, you account will get blocked for another five years, continuing to earn interest, but you won't be allowed to make fresh contributions.
ALSO READ: How Many Times Can You Extend Your PPF Account After It Matures? Check Extension Rules
Tax On PPF Balance
PPF is classified as an EEE (Exempt-Exempt-Exempt) investment, offering tax benefits at three stages. Contributions to PPF are eligible for tax deductions under applicable rules. The interest earned on the account is tax-free, and the maturity amount, including the principal and accumulated interest, is also exempt from tax.
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