PPF is the wonderful debt product, which also provides the best tax benefits. But earlier there were some limitations on premature closure of PPF account. Now they are modified. Let us see those changes.
What is Public Provident Fund (PPF) Account?
I wrote a complete and detailed features about this wonderful debt product in my earlier posts. Please refer the links for the same.
- All about Public Provident Fund (PPF)
- PPF-Loan and Withdrawal
- PPF-When to contribute to get higher returns?
- PPF withdrawal rules & options after 15 years maturity
- 15 Rules of availing Loan against PPF (Public Provident Fund)
- Public Provident Fund -20 unknown facts
Now in this post, I am trying to concentrate on the premature closure of PPF account before completion of 15 years. These changes will be effective from 18th June, 2016.
What was the earlier premature closure of PPF account rules?
Earlier PPF account will be allowed to close in the event of the death of account holder. His/her nominee will be allowed to close the account. Other than this, there is no option for an account holder to close the account.
He has to wait until maturity to close the account. This feels somewhat illiquid, even though there are options like loan and withdrawal after certain years.
What are new rules for premature closure of PPF account ?
Now there are three options to close the account. I try to list them as below.
Along with that, please note below points for understanding more of the premature close of PPF account rules.
# You are allowed to close the account before maturity if the account is completed 5 years. This rule is not applicable to death of account holder.
# Regarding amount required for treatment of serious ailments or life-threatening diseases, you must produce the supporting documents from the competent medical authority.
# Regarding amount required for higher education, you must produce the documents of fee bills in confirmation of admission in a recognized institute of higher education in India or ABROAD.
# In case of premature closure of PPF account, the interest payable to such accounts will be less than 1% of regular account from the date of account opening to the closure of such account.
Let me explain the same with an illustration given in notification itself.
- Notice the maturity amount after the FY 2015-16 (which I marked in red), it is Rs.14,421.19.
- Notice the interest rate change of 1% in case you apply for premature closure of PPF account, it is 1% less than the regular PPF account from beginning of your account to till the year you apply for closure. I marked the interest rate in red.
- Finally, notice the maturity amount after the FY 2015-16 (which I marked in red), it is Rs.13,716.69.
- Notice the maturity difference between two cases, it is Rs.704.50.
- The penalty of 4.8% but not the 1% as defined in a notification. So penalty of premature closure of PPF account is not 1%, but in real it is more.
- The effect will be higher for the older account. It means, if you close the account immediately after 6th year, then the penalty may not me that much higher. However, if go for premature closure in the 10th, 12th or in 14th year, the penalty will grow higher and higher than the actual 1%. SO OLDER THE ACCOUNT, HIGHER THE PENALTY FOR YOU.
Hope you understood this penalty clause.
Any doubts on premature closure of PPF account new rules of 2016?
View Comments (58)
I have opened my ppf account on 27 July 2018 , can I prematurely closed my account on account of life time disease as on Oct 2023
Dear Malik,
Yes, if you or your family members suffering from disease.
My mom got heart attack and surgery was performed on her with CAG + Stent and medicine is being provided to her so is this condition ok
Dear Malik,
Try your luck.
Sir, can one is able to to opt for NPS & KISAN VIKAS PATRA if he is holding a pod account with investment of 1.5 lacs every year?
Dear Sam,
YES.
Sir, What about premature closure during extension period.
If some one have extended the PPF for 5 years after maturity & He needs money inbetween urgently. How the deduction will be made.
Deepak-Same rule applies.
Mare pase 1 lk 6e to mare te invest krvo 6e 1 ti 3 yet mate to best oppsn kyo
Dear Daya,
I am unable to understand your language. Can you elaborate more in English?
What if the customer extended the account for 5 years and after one or two year he wants to close the account without any specific condition I.e medical or higher education...Is it possible
Prashi-Whether you are during 15 years period or the extension period, the closure rules are same which I mentioned above.
If you are in 18th year the reduction in interest rate by 1 percentage point
shall be applicable from the date of the commencement of the current 5 year block period and not
from the date of initial opening of the account. As mentioned in Post Office SB order no 07/2017 dted 24/07/2017 wherein reference is made to Ministry of Finance (DEA) Budget division memorandum F. No.3t2t2014-NSdat ed 0T .07.2017
Milind-Thanks for your sharing. Even in that case also, the calculation will be the same effective from the beginning of such block period.
I started a PPF account on 20th January 2014 i.e. financial year 2013-14. Can I close the account after showing need for higher education fees ? I know it has not been 5 years but the PPF account will complete 5 financial years on 1st of April 2018. Please inform of the date after which I can avail premature closing for higher education.
Amit-You can avail advance after the completion of 5 FYs.
I want to close the account and withdraw fund for higher education. I opened the account on 20th Jan 2014. Can you please tell me the specific date when I can approach for closing account.
hi basu,
we opened a PPF account in the name of our son, in the same month of his birth in Dec 1999. it was extended with contribution for a block period of 5 years. this is going to mature on 01 April 2020. we have changed his account to a major soon after his birthday in this month. we wish to to withdraw some amount from his PPF account for his education. can we withdraw ? and what will be calculation of the amount ? do let us know. thanking you. ajit
Ajit-Please refer my post "PPF withdrawal rules & options after 15 years maturity".
Hi,
My PPF A/C got matured in March 31, 2014. Since currently I'm a NRI, I could not extend it further. I have still not withdrawn the amount. In this case if I withdraw this amount now there will be any penalty or I should wait for another 5 years for account closure. Please advise.
Joseph-Refer the latest changes "PPF and NSC for NRIs – Amendment Rules 2017".
Hey ... need to know something, a family member mistakenly deposited an amount into the PPF account instead of savings account. What can be done now?
Akansha-It is hard to get back the amount. However, you can write a letter to Under Secretary-NS Branch MOF (DEA), New Delhi-1 and try your luck.
Sir,
Could I'm thinking of investing in a SIP for my son and SSA for my daughter. Please suggest if it's a wise idea and also assist me the best SIP for my son. He is 8 yrs old and daughter is 6 yrs old.
Minal-Do you think SIP is an asset class like SSA?
Hi,
Kindly help,Whom should I contact about the premature closure bcoz SBI staff is not ready to collect the doc's & application.Can SBI Nodel Off. will help regarding the same?
Thanks & Regards
Raj Kr.
Raj-Mere rejection by oral by SBI staff will not suffice. You produce the request and let them give in writing that they will not accept. Once you get the written response from them, then approach the SBI nodal office.
Ok Thanks