When the PPF matures, ought to we select closure or extension? Which possibility advantages traders extra? Let’s evaluation the related guidelines earlier than deciding.
PPF stands out as the very best debt instrument for traders looking for stability and development. But, a major variety of people select to take a position primarily for the tax benefits it supplies 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 possibility for these seeking to safeguard their investments.
When your funding objective is to save lots of taxes whereas making certain a safe, tax-free maturity quantity, it naturally raises important unclarity for traders. Some of the 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 offer you the readability wanted to navigate your choices successfully.
I’ve written an in depth publish on this – PPF withdrawal guidelines & choices after 15 years maturity Nevertheless, sharing the identical right here on your profit.
You could first have readability in regards to the maturity of your PPF account. Refer beneath picture for extra readability on this side.
Everyone knows that the PPF interval is 15 years. However in actuality, Â it’s greater than 15 years. I attempted to elucidate the identical with the beneath picture.Â
Chances are you’ll understand that when you opened the account on tenth August 2015, it wouldn’t mature on tenth August 2030, which might be 15 years later. As a substitute, the maturity date can 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’ve gotten three choices. They’re defined beneath.
As soon as the PPF account matures, then you’ve gotten three choices. Many really feel that when the PPF account completes 15 years’ tenure then it’s over. Nevertheless, you’ve gotten 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 whole quantity together with the accrued curiosity. Each banks and publish places of work usually spotlight this selection if you ask in regards to the PPF characteristic. Thus, it may be thought-about a typical selection for many PPF traders.
Once you open your account on August 10, 2015, it would attain maturity on April 1, 2031. At that time, you possibly can 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 too can take out the cash in installments after it matures. Nevertheless, you might be restricted to a 12 months to make this selection. This suggests which you could 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 is not going to 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 can be robotically 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 can be robotically 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 extra 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 can 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 when you haven’t requested to increase it with a contribution or closed the account. The account that matures on April 1, 2016, for 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 can be prolonged for a further 5 years. It has no bounds to it. You may nonetheless profit from incomes curiosity on the accessible stability in this type of account. Nevertheless, you aren’t permitted to make any extra contributions to the sort of account. After a 12 months of the primary selection, neither of you is permitted to switch it.
Essentially the most advantageous side of this selection is the absence of any limitations on withdrawing the stability all through this era. You have got the best to withdraw any quantity current in your account at any time with out restrictions. The stability will proceed to accrue earnings. Nevertheless, this selection 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 Kind H and submit it to the publish workplace or financial institution the place your PPF account is held. You will need to be aware 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 selection by thirty first March 2017. Failure to take action will end result within the activation of the second possibility talked about above by default. Upon submission of the shape, the account can be prolonged for a further 5 years.
When you’ve got not opted for this selection however proceed to contribute as traditional, then such a deposit quantity neither earns any curiosity not eligible for Sec.80C tax profit. To regularize it, you need to write it to the Ministry of Finance, (DEA) NS Department by the Accounts Workplace to regularize the account which was continued by him with out giving the choice.
After selecting this selection, you gained’t be capable to swap again to the second possibility talked about earlier. Some individuals are reluctant to return to the second possibility talked about earlier, primarily because of the accessible liquidity. This selection doesn’t permit for a similar stage of freedom to withdraw the stability because the second possibility.
On this selection, you possibly can withdraw 60% of the stability in the beginning of every prolonged interval (a block of 5 years). As an illustration, if the account matures on 1st April 2016 with a stability of Rs.1 Cr, you possibly can withdraw 60% of this quantity throughout the 5-year block, i.e., Rs.60 lakh. The withdrawals could 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 whole withdrawal restrict is Rs.60 lakh, which could 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 when you opted for the third possibility, then within the subsequent 5-year block interval, you possibly can go for the 2nd possibility with out submitting Kind H. So you might be free to decide on the choice after each such extension.
When inspecting the PPF post-maturity options, it turns into evident that choosing a 5-year extension with contributions is far more advantageous. It is because it supplies liquidity over the prolonged interval and the following 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 provide the identical stage of liquidity throughout the prolonged interval.
Nevertheless, in case your monetary objective is close to the maturity of PPF and you might be counting on this PPF account to fund the objective, then you don’t have any possibility however to shut the account. Therefore, take a name on whether or not to shut or prolong based mostly in your monetary objective fairly than simply abruptly closing or extending.
