The Public Provident Fund - a small savings scheme of the Central Government (framed under the PPF Act of 1968) - is one of the most popular long-term investment avenues in India. The reason is that it offers a decent interest of 7.1% p.a. (compounded yearly), plus offers tax efficiency by way of an E-E-E status.
Meaning, the amount invested is entitled to a deduction of up to Rs 1.50 lakh per financial year under Section 123 read with Schedule XV under the new Income Tax Act, 2025 (erstwhile Section 80C of the Income Tax Act, 1961), the interest earned is tax exempt, and so are the maturity proceeds.
During the 15-year tenure, hard-earned money compounds well, allowing you to plan for envisioned financial goals.
Moreover, there is decent flexibility -- partial withdrawals are permitted, subject to the conditions. So, in this article, let's understand in detail the rules and procedure for withdrawing money from the PPF account.
Partial withdrawals from the PPF Account
A partial withdrawal can be made from the seventh financial year, i.e., after the completion of 6 full financial years from the year the account was opened. Say, you opened the account in FY 2019-20, after 2025-26, i.e. on completion of six full financial years. Note, only one partial withdrawal is allowed per financial year. The partial withdrawal can be for medical emergencies, children's higher education, or a change in residential status to Non-Resident Indian status.
ALSO READ: PPF Calculator: How Much Will A Rs 10,000 Investment Per Month Earn At Retirement? - Explained
How much can be partially withdrawn?
The partial is limited to the least of the following:
ïƒ 50% of the balance in the account at the end of the immediately preceding financial year of partial withdrawal.
ïƒ 50% of the balance at the end of the 4th year preceding the year of withdrawal.
So, there is sufficient liquidity, but you need to think through withdrawals carefully because they affect the compounding of your hard-earned money.
What is the procedure involved?
You need to obtain Form C, duly fill it with all details, including the declaration, mention the withdrawal amount, sign the form, attach a copy of your PPF passbook, and submit it to the bank or post office where you have the PPF account. On scrutiny, the partial withdrawal would be allowed.
Withdrawal During Premature Closure of PPF Account
Say you prematurely close the PPF account, which is allowed after 5 years from account opening. In this case, a 1% penalty is levied on the interest earned on the PPF account from the date of opening of the account, or from the date of commencement of the current five-year block period, as the case may be. In other words, you lose out on some interest earned on the PPF account while making the withdrawal on premature closure of the account.
Note, premature closure of the PPF account is permitted in the following cases:
- Life-threatening disease of the account holder, spouse or dependent children
- For higher education of the account holder or dependent children
- On change of resident status of account holder (i.e. became NRI).
Since it is a premature closure, the entire amount, subject to the aforementioned penalty, can be entirely withdrawn.
What is the procedure involved?
You need to obtain Form C along with Form SB-7B, fill it in with your account number, the account balance, the savings account to which you would like to receive the money, and sign and submit it to the bank or post office where you have the account.
Withdrawal on Maturity
If the balance in the PPF account is withdrawn after 15 years' maturity, there are no penalties or restrictions on withdrawals. The entire balance, i.e. 100% of the accumulated corpus, can be withdrawn.
What is the procedure involved?
You need to duly fill and sign Form C, stating the PPF account number and the amount you wish to withdraw, and submit it to the bank or post office where you have the account.
Withdrawal from the Extended PPF Account
After maturity, say you have chosen to extend the PPF account for a block of 5 years (by submitting Form H). In this case, the withdrawal rules depend on whether you continue the account with or without making contributions.
With contributions/investments during the extension period - In such a case, up to 60% of the total accumulated balance that was present in the account at the exact commencement of that specific five-year block can be withdrawn (using Form C). Note, only one withdrawal per financial year during the extension block of five years is allowed.
Without contributions/investments during the extension period - In such a case, the 60% restriction does not apply. There is flexibility to withdraw the full balance from the PPF account. If you do not withdraw the full balance lying to the credit of your PPF account, the remaining will continue to earn you interest. Keep in mind that if you haven't submitted Form H to the bank or post office (as the case may be) within a year of the maturity of the PPF account, by default, the account is classified as extended without fresh contributions.
ALSO READ:
What about the tax implications of withdrawals?
Whether you partially withdraw from PPF, on premature closure, or after maturity of 15 years, or during the extension of 5 years, the withdrawals are tax-free, given the E-E-E status for PPF. No reporting is required, i.e. you do not need to declare the partial withdrawals when filing your Income Tax Return (ITR).
Tail Note
Understanding the PPF rules is critical when investing in PPF to achieve envisioned financial goals, as they affect your cash flows. Invest and withdraw sensibly from your PPF account, considering your needs. Ideally, withdrawals should be minimised so that the journey of wealth creation goes unhindered. Be a thoughtful investor.
Happy investing!
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.