Date of calculation of the maturity period-Very few are aware that the maturity period of the PPF account is not calculated based on the date of opening the account. The PPF funds rules state that the date of maturity is calculated based on the end of the financial year on which the account is opened.
For instance, if someone opened an account on July 1st2012, the lock-in period calculation starts from March 31st, 2013 and the maturity date is April 1st, 2028.
Contributions made during the entire tenure-If someone makes a lump sum payment for the whole tenure, then the total contribution during this period is 16, not 15. Similarly, in the case of instalment payments the total instalments are 192 (12x16). Going back to the previous example the last lump sum contribution is made in the financial year 2027-2028.
Discontinuing your accountYou can close your account before the lock-in period, but that can be done only in specific cases, like expenses for education or any medical expenditure. Although this can be done only after completion of 5 years. If you withdraw your amount before the lock-in period, the entire amount is tax-free as this scheme falls under the EEE tax status. However, a declaration needs to be made that the PPF account has been withdrawn during tax filing.
Premature withdrawals-Although the entire amount can be withdrawn after 15 years, however, an account holder can also withdraw up to 50% of the total amount at the end of 4th year. Only one withdrawal is permitted every financial year. Extension of Lock-in period-
After the maturity period, a PPF account can also be extended in blocks of 5 years. The account holder can increase the maturity to “n” number of blocks, each block being of 5 years. During this extended 5 years’ term, one can withdraw the money once in a year. And the money that can be withdrawn should not be more than 60% of the balance amount at the start of the lock-in period.
As PPF is a long-term investment, the government plans to extend the lock-in period by 5 years that means the maturity date will exceed 20 years. The government also plans to increase the interest for those who plan to choose the lock-in period of 20 years and tax benefits will also be higher.
Learn more about your Pension Plans here.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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