Public Provident Fund: What are options available once a PPF account matures after 15 years?
Public provident fund (PPF) is an investor-friendly and popular investment scheme on account of its multiple attractive features and benefits in terms of better returns and tax savings under income tax laws. The PPF scheme was launched in 1968 by the Finance Ministry's National Savings Institute.
As far as interest rate on PPF is concerned, the rate is not fixed as it is linked to the 10-year government bond yield. The interest rate on PPF is fixed at the beginning of a quarter based on the average bond yield in the previous three months.
PPF has lock-in of 15 years
The PPF investment comes with a lock-in period of 15 years, from the day of opening the account. With each passing year, this lock-in period progressively comes down. So, if you open a PPF account in April 2023, it will mature in March 2038.
After your PPF account matures, you can withdraw the entire corpus or leave the amount by extending the term for as long as you feel feasible, but that can be extended in blocks of 5 years. And suppose, if you do not withdraw your money from your PPF account once it is matured after 15 years, the account will be extended by default. Your PPF corpus will continue to attract interest on extension as fixed by the government.
What are the options available after the maturity of a PPF account?
Close the account and withdraw entire corpus:
The first option you have when your PPF account matures is that you can opt for closing the account and withdrawing the entire proceeds.
Extend the account term without fresh contribution:
The second option you have is that you do not close your account and extend the term in a block of 5 years after maturity without depositing any fresh money.
Extend the PPF term with fresh deposits:
The third option for you with a matured PPF account is that you can extend the term with fresh deposits. Again the term can be extended for a block of 5 years.
I'd be happy to delve into the details of the Public Provident Fund (PPF) and its options post-maturity.
As an enthusiast well-versed in finance and investment schemes, let's break down the PPF scheme. PPF, launched in 1968 by the Finance Ministry's National Savings Institute, offers investors a secure avenue with appealing features like tax benefits and competitive returns.
One critical aspect to note about PPF is its linkage to the 10-year government bond yield. The interest rate is not fixed; it's determined quarterly based on the average bond yield of the preceding three months. This dynamic interest calculation is fundamental to understanding how returns are generated within this scheme.
The PPF comes with a lock-in period of 15 years from the account opening date. As time progresses within this tenure, the lock-in gradually reduces, providing flexibility. For instance, if someone initiates a PPF account in April 2023, it matures in March 2038.
Post-maturity, individuals holding a matured PPF account have several options:
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Close the account and withdraw the entire corpus: This is the primary choice. You can opt to shut down the account and withdraw the total accumulated sum.
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Extend the account term without fresh contribution: If you prefer not to close the account, you can extend it in blocks of 5 years after maturity without making additional deposits. The account continues to earn interest as per government-fixed rates.
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Extend the PPF term with fresh deposits: Alternatively, you can prolong the term by making fresh deposits, extending it again in 5-year blocks. This option allows you to continue contributing to the PPF and benefit from its tax-saving and interest accumulation features.
Each choice has its implications, balancing factors like immediate financial needs, long-term savings, and tax advantages. The decision often depends on individual financial goals and requirements.
Understanding the nuances of PPF and its post-maturity options empowers investors to make informed choices aligned with their financial objectives and circ*mstances.
