When the PPF matures, ought to we select closure or extension? Which choice advantages traders extra? Let’s evaluate the related guidelines earlier than deciding.
PPF stands out as one of the best debt instrument for traders looking for stability and progress. But, a big variety of people select to speculate primarily for the tax benefits it offers below Part 80C, together with the attract of tax-free returns upon maturity. Moreover, the truth that it’s a government-backed scheme provides a layer of belief and safety, making it an interesting choice for these seeking to safeguard their investments.
When your funding purpose is to avoid wasting taxes whereas making certain a safe, tax-free maturity quantity, it naturally raises important unclarity for traders. Some of the urgent dilemmas is whether or not to shut or lengthen a Public Provident Fund (PPF) account after it matures.
After PPF Maturity Ought to We Shut or Lengthen?
To make knowledgeable choices concerning the closure or extension of your PPF after it matures, it’s important to first grasp the related guidelines and laws that come into play. Gaining this understanding will give you the readability wanted to navigate your choices successfully.
I’ve written an in depth submit on this – PPF withdrawal guidelines & choices after 15 years maturity Nevertheless, sharing the identical right here to your profit.
You could first have readability concerning the maturity of your PPF account. Refer beneath picture for extra readability on this facet.
Everyone knows that the PPF interval is 15 years. However in actuality, it’s greater than 15 years. I attempted to elucidate the identical with the beneath picture.
It’s possible you’ll notice that for those who opened the account on tenth August 2015, it wouldn’t mature on tenth August 2030, which might be 15 years later. As an alternative, the maturity date will probably be 1st April 2031, because the 15-year interval really begins on 1st April 2016. I belief this rationalization clarifies the idea for you.
Now as soon as the account matures, then you’ve gotten three choices. They’re defined beneath.
As soon as the PPF account matures, then you’ve gotten three choices. Many really feel that when the PPF account completes 15 years’ tenure then it’s over. Nevertheless, you’ve gotten three choices left. I attempted to elucidate the identical from the beneath picture.
1) Closing of PPF account after the maturity or completion of 15 years-
This alternative is well known. We begin by opening an account, making contributions for as much as 15 years, and finally closing it to withdraw the overall quantity together with the accrued curiosity. Each banks and submit places of work sometimes spotlight this feature once you ask concerning the PPF function. Thus, it may be thought-about a typical alternative for many PPF traders.
Whenever you open your account on August 10, 2015, it should attain maturity on April 1, 2031. At that time, you possibly can withdraw each your preliminary funding and the accrued curiosity in full. The account will then be closed routinely. IF you want to make a brand new funding after this account has been closed, you’ll need to arrange a brand new PPF account.
Are you conscious of this? You can even take out the cash in installments after it matures. Nevertheless, you might be restricted to a 12 months to make this alternative. This suggests that you may take out the cash in installments till March 31, 2017, supplied your account matured on April 1, 2016.
So long as you keep your PPF account, you’ll proceed to obtain curiosity if it has matured and also you haven’t closed it. Nonetheless, such accounts is not going to be eligible for any extra contributions. Moreover, except you shut the present account, you gained’t be capable to open a brand new one. The account will probably be routinely renewed for a further 5 years (with out the choice to make a contribution) following a 12 months of ready.
2) Lengthen PPF account with out additional contribution–
The default alternative is that this. This feature will probably be routinely enabled if, for instance, your account matured on April 1, 2016, and also you didn’t shut it or apply to increase it for an additional 5 years WITH CONTRIBUTION. Notice that you’ve got one 12 months from the date of maturity to submit the applying to increase the account with a contribution for a block of 5 years. If not, this alternative will probably be chosen for you routinely.
This would be the default setting for a five-year interval. This suggests that the account will stay open for 5 years for those who haven’t requested to increase it with a contribution or closed the account. The account that matures on April 1, 2016, for example, will mature on April 1, 2021. After that, if neither the account was closed nor an utility was made to increase it with out making a contribution, the account will probably be prolonged for a further 5 years. It has no bounds to it. You’ll be able to nonetheless profit from incomes curiosity on the out there steadiness in this type of account. Nevertheless, you aren’t permitted to make any extra contributions to any such account. After a 12 months of the primary alternative, neither of you is permitted to change it.
Probably the most advantageous facet of this feature is the absence of any limitations on withdrawing the steadiness all through this era. You might have the correct to withdraw any quantity current in your account at any time with out restrictions. The steadiness will proceed to accrue earnings. Nevertheless, this feature might solely be utilized as soon as per 12 months.
3) Lengthen PPF account with additional contribution–
After the account reaches maturity, it’s essential to full Kind H and submit it to the submit workplace or financial institution the place your PPF account is held. You will need to word that the applying should be submitted earlier than the completion of 1 12 months from the maturity date. As an illustration, if the account matured on 1st April 2016, it’s essential to train this feature by thirty first March 2017. Failure to take action will outcome within the activation of the second choice talked about above by default. Upon submission of the shape, the account will probably be prolonged for a further 5 years.
When you have not opted for this feature however proceed to contribute as regular, then such a deposit quantity neither earns any curiosity not eligible for Sec.80C tax profit. To regularize it, you need to write it to the Ministry of Finance, (DEA) NS Department via the Accounts Workplace to regularize the account which was continued by him with out giving the choice.
After selecting this feature, you gained’t be capable to swap again to the second choice talked about earlier. Some persons are reluctant to return to the second choice talked about earlier, primarily because of the out there liquidity. This feature doesn’t enable for a similar degree of freedom to withdraw the steadiness because the second choice.
On this alternative, you possibly can withdraw 60% of the steadiness in the beginning of every prolonged interval (a block of 5 years). As an illustration, if the account matures on 1st April 2016 with a steadiness of Rs.1 Cr, you possibly can withdraw 60% of this quantity in the course of the 5-year block, i.e., Rs.60 lakh. The withdrawals could be Rs.20 lakh within the first 12 months of extension, Rs.10 lakh within the second 12 months, Rs.5 lakh within the third 12 months, and so forth till the 5-year extension matures. Within the above instance, the overall withdrawal restrict is Rs.60 lakh, which could be withdrawn in a single withdrawal or in yearly installments. Nevertheless, just one withdrawal is allowed every monetary 12 months.
This rule applies to the subsequent block of 5 years extension once more.
Notice that, for the primary block of 5-year extension for those who opted for the third choice, then within the subsequent 5-year block interval, you possibly can go for the 2nd choice with out submitting Kind H. So you might be free to decide on the choice after each such extension.
When inspecting the PPF post-maturity options, it turns into evident that choosing a 5-year extension with contributions is rather more advantageous. It is because it offers liquidity over the prolonged interval and the next closure interval can also be 5 years. Conversely, closing the present PPF account and opening a brand new one would require contributions for 15 years and wouldn’t supply the identical degree of liquidity in the course of the prolonged interval.
Nevertheless, in case your monetary purpose is close to the maturity of PPF and you might be counting on this PPF account to fund the purpose, then you don’t have any choice however to shut the account. Therefore, take a name on whether or not to shut or lengthen primarily based in your monetary purpose fairly than simply abruptly closing or extending.
