For many investors in India, the Public Provident Fund has served as one of the highly trusted savings instruments that offers a perfect blend of safety, tax benefits and steady returns.
Backed by the government, this long-term savings scheme comes with a lock-in period of 15 years, after which the account matures. However, maturity does not mean the end of your PPF journey. In reality, one of the most attractive features of this scheme is the option to extend the account beyond its initial term.
This means that investors can continue to enjoy tax-free interest as well as compounding benefits by extending their account in blocks of five years each. Another major factor that makes this even more appealing is that there is no restriction on the number of times you can extend it, which means that your PPF can remain active for as long as you wish, provided you follow the rules.
As soon as the PPF account of an individual completes 15 years, they have two choices. Either they can withdraw the amount and close the account, or have the opportunity to extend it in 5-year blocks. However, investors must note that this extension is done automatically. This means that they will be required to submit a request within one year of maturity.
Moreover, investors can extend their PPF account in two ways. First, they can continue to make contributions by depositing money on a regular basis and earn interest. Secondly, they can go without contributions, wherein the existing balance keeps earning interest. This means you are not required to add more funds to it.
Partial withdrawals are allowed in both these options, but the rules are slightly different.
ALSO READ: Have A PPF Account? How Investment Before April 5 Will Maximise The Returns
Why Is Extension Useful?
- Tax-Free Growth: PPF enjoys EEE status (Exempt-Exempt-Exempt). This means your contributions, interest, and withdrawals are tax-free.
- Stable Returns: Current interest rate is 7.1%. It is reviewed quarterly by the government.
- Power of Compounding: Extending keeps compounding intact and helps in long-term wealth creation.
- Safe Investment: It makes it one of the safest fixed-income instruments.
ALSO READ: Gold Loan Rules: How Falling Gold Prices Can Reduce Loan Eligibility
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.