When the PPF matures, ought to we select closure or extension? Which choice advantages buyers extra? Let’s evaluation the related guidelines earlier than deciding.
PPF stands out as the perfect debt instrument for buyers in search of stability and development. But, a big variety of people select to take a position primarily for the tax benefits it gives beneath 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 trying to safeguard their investments.
When your funding aim is to save lots of taxes whereas making certain a safe, tax-free maturity quantity, it naturally raises vital unclarity for buyers. One 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 Prolong?
To make knowledgeable choices relating to the closure or extension of your PPF after it matures, it’s important to first grasp the related guidelines and rules that come into play. Gaining this understanding will offer you the readability wanted to navigate your choices successfully.
I’ve written an in depth publish on this – PPF withdrawal guidelines & choices after 15 years maturity Nonetheless, sharing the identical right here to your profit.
You have to 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 clarify the identical with the beneath picture.
Chances are you’ll understand that if you happen to opened the account on tenth August 2015, it wouldn’t mature on tenth August 2030, which might be 15 years later. As a substitute, the maturity date shall be 1st April 2031, because the 15-year interval really begins on 1st April 2016. I belief this clarification clarifies the idea for you.
Now as soon as the account matures, then you will have three choices. They’re defined beneath.
As soon as the PPF account matures, then you will have three choices. Many really feel that after the PPF account completes 15 years’ tenure then it’s over. Nonetheless, you will have three choices left. I attempted to clarify the identical from the beneath picture.
1) Closing of PPF account after the maturity or completion of 15 years-
This alternative is widely 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 publish workplaces sometimes spotlight this feature once you ask concerning the PPF function. Thus, it may be thought-about a typical alternative for many PPF buyers.
While you open your account on August 10, 2015, it’ll 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 mechanically. IF you want to make a brand new funding after this account has been closed, you have to to arrange a brand new PPF account.
Are you conscious of this? You can too take out the cash in installments after it matures. Nonetheless, you might be restricted to a 12 months to make this alternative. This means that you may take out the cash in installments till March 31, 2017, offered 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. However, such accounts won’t 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 shall be mechanically renewed for a further 5 years (with out the choice to make a contribution) following a 12 months of ready.
2) Prolong PPF account with out additional contribution–
The default alternative is that this. This feature shall be mechanically 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. Be aware that you’ve got one 12 months from the date of maturity to submit the appliance to increase the account with a contribution for a block of 5 years. If not, this alternative shall be chosen for you mechanically.
This would be the default setting for a five-year interval. This means that the account will stay open for 5 years if you happen to 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 software was made to increase it with out making a contribution, the account shall be prolonged for a further 5 years. It has no bounds to it. You possibly can nonetheless profit from incomes curiosity on the accessible stability in this type of account. Nonetheless, you aren’t permitted to make any extra contributions to one of these account. After a 12 months of the primary alternative, neither of you is permitted to change it.
Essentially the most advantageous facet of this feature is the absence of any limitations on withdrawing the stability all through this era. You’ve gotten the fitting to withdraw any quantity current in your account at any time with out restrictions. The stability will proceed to accrue earnings. Nonetheless, this feature could solely be utilized as soon as per 12 months.
3) Prolong PPF account with additional contribution–
After the account reaches maturity, you will need to full Kind H and submit it to the publish workplace or financial institution the place your PPF account is held. It is very important observe that the appliance have to be submitted earlier than the completion of 1 12 months from the maturity date. For example, if the account matured on 1st April 2016, you will need to train this feature by thirty first March 2017. Failure to take action will consequence within the activation of the second choice talked about above by default. Upon submission of the shape, the account shall be prolonged for a further 5 years.
When you’ve got not opted for this feature however proceed to contribute as typical, then such a deposit quantity neither earns any curiosity not eligible for Sec.80C tax profit. To regularize it, it’s important to write it to the Ministry of Finance, (DEA) NS Department by 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 as a result of accessible liquidity. This feature doesn’t permit for a similar degree of freedom to withdraw the stability because the second choice.
On this alternative, you possibly can withdraw 60% of the stability at first of every prolonged interval (a block of 5 years). For example, if the account matures on 1st April 2016 with a stability 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 will 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 will be withdrawn in a single withdrawal or in yearly installments. Nonetheless, just one withdrawal is allowed every monetary 12 months.
This rule applies to the subsequent block of 5 years extension once more.
Be aware that, for the primary block of 5-year extension if you happen to 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 analyzing the PPF post-maturity options, it turns into evident that choosing a 5-year extension with contributions is far more advantageous. It is because it gives liquidity over the prolonged interval and the following closure interval can be 5 years. Conversely, closing the present PPF account and opening a brand new one would require contributions for 15 years and wouldn’t provide the identical degree of liquidity in the course of the prolonged interval.
Nonetheless, in case your monetary aim is close to the maturity of PPF and you might be counting on this PPF account to fund the aim, then you haven’t any choice however to shut the account. Therefore, take a name on whether or not to shut or lengthen based mostly in your monetary aim quite than simply abruptly closing or extending.
