Grow your money in PPF even after your PPF matures

What happens to your PPF account on maturity? Can you contribute further? PPF has different options for you to choose on maturity. Get the answers here.

Continuing our effort to bring some of the simple yet effective investment options out there, which are safe and still give good returns on investments we continue our focus on PPF. In case you missed the FAQs on PPF which cover all you need to know about a PPF account in short and simple words you can check here. You may also check Recurring Deposits here. Back to PPF then, so your PPF account is about to mature and you are all geared up to withdraw all the money, or want to know what happens to your PPF account on maturity, or what if you want to continue your PPF investment, since it is the best tax savings, guaranteed returns product; so what are your options when PPF account matures? Let’s find out.

PPF account is a tax saving piggy bank which also gives you good compounded interest since you are free to deposit as much amount as an when you want in the PPF account until and unless it is within the limits that is maximum of Rs. 1 Lac with not more than 12 deposits in a year. But on the other hand, you have to wait to for 15 years to withdraw the entire amount from it, at which stage the amount is substantial though. But actually there are 3 options on PPF maturity that you can choose from, and not necessarily withdraw everything if you do not want to.

1. Withdraw the entire amount from the PPF account and close the account:

This is simple and straight forward, you have waited for 15 years to withdraw your money and the interest it has earned and since now the account is matured, you can do so. But it will be only in the 16th year, you need to complete 15 years and make contributions to it and only from the beginning of 16th year and before the start of the 17th year can you close down your account and withdraw all you have.

2. Extend the account in slabs of 5 years till the time you want and continue contributing:

In case you are thinking of withdrawing all your money from PPF just because you think it has matured and what to do, well you can extend the same account in slabs of 5 years each for the rest of your life and keep contributing, till you wish. The same contribution rules apply as they were when you had started the account. However the withdrawal rules are much more flexible.

Unlike before where you could only make partial withdrawals after 7 years, once you extend your PPF account on maturity, you can withdraw up to 60% of the balance in your account in the 5 year extension period, but with only 1 withdrawal in a year. For example if you have Rs. 10 Lac in your PPF account on maturity, and extend it for another 5 years, you can withdraw up to Rs. 6 Lac within the 5 year extension period but not more than one withdrawal in a year. It can be 2 Lac in first year and 1 Lac thereafter or 4 Lac in one year and 1 Lac in the last year or all 6 Lac during anytime in the 5 years; this depends on you. But once the 60% limit is reached you cannot withdraw anymore in those 5 years or if 1 withdrawal in year is made you cannot withdraw further in that year.

These same rules apply if you extend the account for another 5 years, now if you have withdrawn 6 Lac like in the above example, same rules apply to the remaining 4 Lac, with 2 Lac 40 Thousand available for withdrawal during this period. However at the start of the next 5 year period, you can choose to close or continue the account.

3. Keep the account active without new contributions and let your Money Grow:

If you feel that you cannot contribute further to your Public Provident Fund account then you can still keep it active and earn interest year after year on it. Once your PPF account matures, you can leave it as it is and if you do not choose from any of the above options, by default, this option is exercised and your account will be ‘extended without further contributions’. You can also request your bank for the same though.

However thing to note here is that once your account is extended under this option, you cannot make any further contributions to your PPF account. You will still however continue to earn interest on the balance you have in your account at the applicable interest rates and thus your money will still grow. The thing to note here is that even though you cannot make further contributions to your PPF account, you can withdraw any amount during the year, 5%, 20%, 40% 60%, 90% whatever, BUT-BUT-BUT not more than once in a year.

This aspect of your PPF account can be used as a regular income scheme every year, where you withdraw a fixed amount every year and let the balance grow by compounded interest. For instance like in the above example, you have 10 Lac in your account at the end of maturity, then in that case you can withdraw 50 thousand in a year and the remaining 9.5 Lac earns interest and it is added to the 9.5 Lac and again you withdraw the same next year. This can be a great regular income plan after retirement.

In case you do not need the money from your PPF on maturity, it is advisable to keep it in there either by the option of Without Contribution or Extended for 5 year slabs, if you wish to contribute further. It is a great tool to grow and multiply your money, and yes, the amount you contribute to it is exempted from tax and on maturity too the principle + interest is tax-free. It is also exempt from wealth tax. Think and use the PPF wisely, it is indeed a great financial tool.

Aniket Vaishnav