When the PPF matures, ought to we select closure or extension? Which choice advantages traders extra? Let’s overview the related guidelines earlier than deciding.
PPF stands out as the perfect debt instrument for traders in search of stability and development. But, a major variety of people select to speculate primarily for the tax benefits it offers below 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 seeking to safeguard their investments.
When your funding aim is to avoid wasting taxes whereas guaranteeing a safe, tax-free maturity quantity, it naturally raises important unclarity for traders. 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 Lengthen?
To make knowledgeable selections relating to the closure or extension of your PPF after it matures, it’s important to first grasp the related guidelines and laws that come into play. Gaining this understanding will give you the readability wanted to navigate your choices successfully.
I’ve written an in depth submit on this – PPF withdrawal guidelines & choices after 15 years maturity Nevertheless, sharing the identical right here in your profit.
It’s essential 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, Â it’s greater than 15 years. I attempted to clarify the identical with the beneath picture.Â
You might notice that in the event you 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 probably 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 may have three choices. They’re defined beneath.
As soon as the PPF account matures, then you may have three choices. Many really feel that when the PPF account completes 15 years’ tenure then it’s over. Nevertheless, you may 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 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 entire quantity together with the accrued curiosity. Each banks and submit workplaces sometimes spotlight this feature whenever you ask concerning the PPF characteristic. Thus, it may be thought of a standard selection for many PPF traders.
Whenever you open your account on August 10, 2015, it can 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 robotically. 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? You can even take out the cash in installments after it matures. Nevertheless, you’re restricted to a 12 months to make this selection. This suggests you could take out the cash in installments till March 31, 2017, offered your account matured on April 1, 2016.
So long as you preserve your PPF account, you’ll proceed to obtain curiosity if it has matured and also you haven’t closed it. Nonetheless, 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 probably be robotically renewed for a further 5 years (with out the choice to contribute) following a 12 months of ready.
2) Lengthen PPF account with out additional contribution–
The default selection is that this. This feature will probably be robotically 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. Notice that you’ve got 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 probably be chosen for you robotically.
This would be the default setting for a five-year interval. This suggests that the account will stay open for 5 years in the event you haven’t requested to increase it with a contribution or closed the account. The account that matures on April 1, 2016, as an illustration, 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 probably be prolonged for a further 5 years. It has no bounds to it. You possibly can nonetheless profit from incomes curiosity on the out there steadiness in this sort 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.
Probably the most advantageous facet of this feature is the absence of any limitations on withdrawing the steadiness all through this era. You’ve the best to withdraw any quantity current in your account at any time with out restrictions. The steadiness will proceed to accrue earnings. Nevertheless, this feature could solely be utilized as soon as per 12 months.
3) Lengthen PPF account with additional contribution–
After the account reaches maturity, you could full Type H and submit it to the submit workplace or financial institution the place your PPF account is held. It is very important be aware that the applying 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 could 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 will probably be prolonged for a further 5 years.
You probably have not opted for this feature however proceed to contribute as standard, then such a deposit quantity neither earns any curiosity not eligible for Sec.80C tax profit. To regularize it, you must 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 swap again to the second choice talked about earlier. Some individuals are reluctant to return to the second choice talked about earlier, primarily as a result of out there liquidity. This feature doesn’t enable for a similar degree of freedom to withdraw the steadiness because the second choice.
On this selection, you’ll be able to withdraw 60% of the steadiness in the beginning of every prolonged interval (a block of 5 years). For example, 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 entire 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 following block of 5 years extension once more.
Notice that, for the primary block of 5-year extension in the event you 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’re 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’s because it offers 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 degree of liquidity in the course of the prolonged interval.
Nevertheless, in case your monetary aim is close to the maturity of PPF and you’re 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 prolong primarily based in your monetary aim relatively than simply abruptly closing or extending.
