Your PPF is About to Mature. Here’s How to Extend a PPF Account on Maturity

The PPF was launched in 1968 by the Finance Ministry's National Savings Institute. Since the scheme's introduction, it has emerged as a powerful tool for creating long-term wealth for investors. The investors build their retirement corpus by regularly contributing to the PPF Account over a long period of time. The PPF has gained immense popularity, especially among the small savers, due to the attractive interest rates and tax benefits that it offers. The PPF deposit starts from Rs 500 and can go up to Rs 1,50,000 per annum. PPF scores over other investment options mainly because it provides tax exemption under section 80C of the Income Tax Act, and the returns from PPF are also not taxable. You can use the online PPF Calculators to know how much you will earn on maturity. Besides, during the times of financial emergency, you can opt for Loan Against PPF, which offers funds against your PPF balance at an attractive interest rate.

The PPF accounts come with a maturity period of 15 years. However, this period can be extended, which many PPF Account holders do not know. Here are the available options when a PPF Account matures:

1. Close the PPF Account and withdraw funds:

As we know, the PPF account has a maturity period of 15 years. For example, if you open a PPF Account in June 2022, the account opening year is considered 31st March 2023, i.e., the end of the fiscal year of the actual account opening. Now, calculating 15 years from the year 2023, your PPF account will mature on 1st April 2038.

To close the PPF Account and withdraw the funds, you need to visit the bank or Post Office where you had opened your account. The Post Office or bank representative will hand over you the PPF account closure form. Upon submitting the Form and the necessary documents, your PPF Account will get closed. The principal amount and the earned interest will be credited to your registered bank account.

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2. Extend the PPF Account with the available balance:

Closing the PPF account is the most common practice that the PPF account holders follow. However, if you still want to continue benefiting from PPF deposit features even after its maturity, you can consider extending your PPF account. In the absence of any new funds to contribute to the PPF account, you can choose to extend the PPF account without contributing any fresh funds. This will ensure you continue earning interest until you close the account.

The PPF Account extension can be done in five-year blocks. Meaning, upon maturity of the account, you can extend the account for another five years. There is no limit on the number of times you can renew the PPF account. So, you can indefinitely continue and renew the account after every five years. However, you should know that once you choose the option to extend the account without making any fresh contributions, you cannot make any contributions even if you want to in the future.

This option allows you to make one withdrawal every fiscal year. This withdrawal does not limit the amount to be withdrawn, and the remaining balance continues to earn applicable interest.

3. Extend the PPF Account with fresh/new contribution:

You can also choose to extend your PPF Account with contributions after its maturity by submitting Form H to the bank or Post Office within a year from the date of maturity of the PPF Account. If you do not submit Form H within one year, the deposits made after the maturity period will be considered irregular and not earn any interest. The fresh deposits will not be eligible for tax deduction under Section 80C of the Income Tax Act. Therefore, you need to make sure you submit the Form within the given time limit to enjoy the benefits of the PPF deposit.

This option allows you one partial withdrawal during the entire extension period of 5 years. You can only withdraw 60% of the amount in your account at the beginning of the extension period. This amount can be withdrawn in one instalment or in several instalments over five years.

Benefits of extending your PPF Account:

If you do not need the funds at the PPF maturity or if your retirement is far away, you should consider extending your PPF Account. By extending the PPF Account and making fresh contributions, you will continue to earn a high-interest rate and also benefit from the tax exemption investment and returns. This will ensure you have sufficient retirement corpus when you likely need it. However, you should consider your requirements and the withdrawal limits when extending the PPF Account.

Here's how to extend your PPF Account:

In order to close your PPF Account and withdraw funds, you need to submit the PPF account closure Form. In the absence of not submitting the account closure Form within one year, your PPF Account gets automatically extended for the next 5 years.

To extend the PPF account with a fresh contribution, you need to/must submit Form H with a minimum contribution of Rs 500 within one year. In the absence of Form H, any fresh contributions made to the PPF account will not gain any interest or tax benefit.

To Conclude:

Unlike Fixed Deposits, the PPF interest rate fluctuates every quarter. Economic growth helps you earn higher interest, resulting in accumulating a satisfactory retirement corpus. If you do not have any big expenses planned and have saved sufficient contingency funds, extending your PPF Account and gaining high interest and tax benefits makes sense.

At PersonalFN, we have launched a Complete Guide to Public Provident Fund (PPF) - 2022 Edition. This guide includes evrything, from various benefits of having a PPF Account to useful tips to make the most of your PPF. Click here to download your copy of the guide and learn everything about one of the most sought after investment avenues for tax planning - PPF.

Warm Regards,
Ketki Jadhav
Content Writer