The Public Provident Fund or PPF is a state-backed savings scheme in India that generates tax-free income and offers an interest rate of 7.1% for Q2 FY 2025-26. Though there is a lock-in period of fifteen years, it really encourages long-term savings. There are withdrawal provisions and allowance thereof, or at least some flexibility. The said provisions will breathe new life in partial, premature, and full withdrawals from 2025 and will be accompanied by the key processes.
Partial Withdrawal Rules
Partial withdrawals are permitted only after the completion of five financial years from the year in which the account was opened. Account holders are entitled to withdraw 50% of the balance at the end of the lower of the two years: either the fourth financial year before the withdrawal year or the immediate year preceding the withdrawal year.
Premature Closure Conditions
In specific situations such as medical emergencies, higher education, or a change in residence (like becoming an NRI), premature closure is allowed after five years. A 1% penalty on interest will be imposed, thus reducing the effective rate to 6.1%. Let us explain with an example: interest on a balance of ₹10 lakh is accrued at the rate of 7.1% for seven years; closing the account in 2025 would mean that the interest would be charged at 6.1%, slightly reducing the payout. Required documents include medical reports or visa proofs for NRIs. NRIs are, however, required to close accounts at maturity; funds are credited to an NRO account, non-repatriable.
Full Withdrawal at Maturity
At the 15-year mark, from the end of the financial year in which the account was opened (e.g., an account opened in July 2010 matures in April 2026), the full balance including interest could be withdrawn, free of tax. Assuming an annual contribution of ₹1.5 lakhs at 7.1%, the maturity amount can rise to ₹40.68 lakhs by 2040. The holders can choose to close the account by submitting Form C (or Form 2 in some banks) and the PPF passbook at the bank or post office.
Extension Options Post-Maturity
Payment options after maturity:
- Full withdrawal: Close the account and withdraw all the money.
- Extend without deposit: The accrued interest (7.1% in 2025) can be withdrawn once annually, up to the entire balance.
- Extend with deposit: Submit Form H within one year from maturity to continue depositing (₹500–₹1.5 lakh yearly). Withdrawal restrictions apply to 60% of the balance, as on the date of extension; one time per year. Failure to submit Form H will lead to a default situation of extension without deposit, and no interest or tax benefits will be paid on deposits.
Withdrawal Procedure
To withdraw, submit Form C or Form 2 at the bank or post office, indicating your PPF account number, withdrawal amount, and bank details for direct credit. Enclose your passbook and give proof of KYC (such as Aadhaar, PAN). In case of premature closure, provide supporting documents. Funds are processed for credit in a couple of days in the linked account. Cancelled NRO cheque is needed for NRIs.
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