When the PPF matures, ought to we select closure or extension? Which choice advantages buyers extra? Let’s evaluate the related guidelines earlier than deciding.
PPF stands out as the very best debt instrument for buyers looking for stability and development. But, a major variety of people select to speculate primarily for the tax benefits it supplies underneath 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 guaranteeing a safe, tax-free maturity quantity, it naturally raises vital unclarity for buyers. One of the crucial urgent dilemmas is whether or not to shut or prolong a Public Provident Fund (PPF) account after it matures.
After PPF Maturity Ought to We Shut or Prolong?
To make knowledgeable selections concerning 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 give you the readability wanted to navigate your choices successfully.
I’ve written an in depth put up on this – PPF withdrawal guidelines & choices after 15 years maturity Nevertheless, sharing the identical right here in 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.
Chances are 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 likely be 1st April 2031, because the 15-year interval truly begins on 1st April 2016. I belief this rationalization clarifies the idea for you.
Now as soon as the account matures, then you’ve got three choices. They’re defined beneath.
As soon as the PPF account matures, then you’ve got three choices. Many really feel that when the PPF account completes 15 years’ tenure then it’s over. Nevertheless, you’ve got 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 selection is widely known. We begin by opening an account, making contributions for as much as 15 years, and finally closing it to withdraw the full quantity together with the accrued curiosity. Each banks and put up workplaces sometimes spotlight this feature while you ask concerning the PPF characteristic. Thus, it may be thought-about a standard selection 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’ll be able to 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 will have to arrange a brand new PPF account.
Are you conscious of this? It’s also possible to take out the cash in installments after it matures. Nevertheless, you might be restricted to a 12 months to make this selection. This means 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. 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 will likely be mechanically renewed for a further 5 years (with out the choice to contribute) following a 12 months of ready.
2) Prolong PPF account with out additional contribution–
The default selection is that this. This selection will likely be mechanically enabled if, for example, 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. Observe that you’ve 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 selection will likely 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 for those who haven’t requested to increase it with a contribution or closed the account. The account that matures on April 1, 2016, as an 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 will likely be prolonged for a further 5 years. It has no bounds to it. You may 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 this sort of account. After a 12 months of the primary selection, neither of you is permitted to switch it.
Essentially the most advantageous facet of this feature is the absence of any limitations on withdrawing the steadiness all through this era. You’ve gotten the precise 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) Prolong PPF account with additional contribution–
After the account reaches maturity, you need to full Type H and submit it to the put up 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, you need to train this feature by thirty first March 2017. Failure to take action will end result within the activation of the second choice talked about above by default. Upon submission of the shape, the account will likely be prolonged for a further 5 years.
You probably have 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 a must 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 change 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 selection doesn’t permit for a similar stage of freedom to withdraw the steadiness because the second choice.
On this selection, you’ll be able to withdraw 60% of the steadiness at first 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’ll be able to withdraw 60% of this quantity in the course of the 5-year block, i.e., Rs.60 lakh. The withdrawals might 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 full withdrawal restrict is Rs.60 lakh, which might 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.
Observe 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’ll be able to go for the 2nd choice with out submitting Type 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 way more advantageous. It is because it supplies 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 stage of liquidity in the course of the prolonged interval.
Nevertheless, 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 don’t have any choice however to shut the account. Therefore, take a name on whether or not to shut or prolong primarily based in your monetary aim fairly than simply abruptly closing or extending.