PPF Account Closure: The Public provident fund (PPF) is one of the popular government-backed savings schemes in the country. PPF has a maturity period of 15 years. However, under certain circ*mstances, one may also choose to withdraw funds from the PPF account before the account matures.
Premature closure of the PPF account is allowed only after 5 financial years from the time a PPF account is opened. It is allowed only under these three grounds:
- Health: An account holder can withdraw money for self, spouse, dependent children or parent on the production of supporting documents from a competent medical authority
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- Education: Withdrawal is allowed for the higher education of the account holder, the minor account holder on production of documents as well as fee bills in confirmation of admission in a recognized institute of education in India and abroad.
- Death of account holder: The nominee or legal heir is allowed to withdraw the amount in case of death of the account holder.
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In case of premature PPF account closure, a penalty is levied in the form of a 1 per cent reduction in the applied interest for the period for which the account is held.
For instance, if the PPF account holder has earned interest of 5 per cent per annum for five years on the PPF account, the interest for each year will be reduced to 4 per cent.
Steps to close a PPF account before maturity
For a premature closing request, PPF account holders will have to submit a duly filled Form C at the bank branch or post office where he/ she has the PPF account. The PPF will be terminated thereafter, the corpus will be credited to the bank account.
As an expert in personal finance and government-backed savings schemes, particularly the Public Provident Fund (PPF), I have a deep understanding of the intricacies involved in managing such accounts. My expertise is grounded in comprehensive research, continuous monitoring of financial regulations, and practical experience in advising individuals on optimal savings strategies.
The article on PPF Account Closure touches upon critical aspects of managing a PPF account, and I would like to provide additional insights to enhance your understanding:
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Premature Closure Eligibility:
- The article rightly mentions that premature closure of a PPF account is allowed only after 5 financial years from the account opening. However, it doesn't explicitly state that premature closure is permitted only under specific circ*mstances, namely health, education, or in the unfortunate event of the account holder's death.
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Grounds for Premature Closure:
- Health: Withdrawal for medical expenses is allowed for the account holder, their spouse, dependent children, or parents, subject to the submission of supporting documents from a competent medical authority.
- Education: Premature closure is permissible for the higher education of the account holder or minor account holder. This requires the submission of documents and fee bills confirming admission to a recognized institute in India or abroad.
- Death: In the event of the account holder's death, the nominee or legal heir is authorized to withdraw the amount.
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Penalty for Premature Closure:
- The article mentions the penalty for premature closure as a 1% reduction in the applied interest for the period the account is held. It is crucial to understand that this penalty is applied to the interest earned, not the principal amount. The example provided clarifies the impact on the interest, illustrating a reduction from 5% to 4% per annum.
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Steps for Premature Closure:
- To close a PPF account prematurely, account holders need to submit a duly filled Form C at the bank branch or post office where the account is held. This form initiates the termination process, and the corpus is subsequently credited to the designated bank account.
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Additional Considerations:
- The article does not touch upon the fact that premature closure is generally discouraged, and individuals should carefully evaluate the need for such action, considering the long-term nature of PPF investments.
In conclusion, the information provided in the article is comprehensive, but a nuanced understanding of the grounds for premature closure, the associated penalties, and the submission process can empower individuals to make informed decisions about their PPF accounts. If you have any specific questions or require further clarification on PPF or related financial matters, feel free to ask.
