PPF Withdrawal Rules: Guide to Partial, Premature and Closure After 15 Years

The Public Provident Fund (PPF) is a long-term savings and tax benefit scheme funded by the government of India. It is meant to assist people in establishing a retirement corpus. Every individual, whether self-employed or salaried, can contribute to PPF.One of the primary benefits of the PPF account is its tax-free interest rate compounded yearly, and withdrawal on retirement or termination is fully exempt. Contributions to PPF are also eligible for deduction under section 80C up to Rs. 1.5 lacs per year.

While the PPF account gives freedom regarding contributions and duration, it also comes with specific withdrawal criteria and limitations.

This article discusses the PPF withdrawal criteria, including partial, premature, and closure after 15 years, to help you make educated choices about your PPF investments.

Interest Rate Update

The PPF interest rate for FY 2025-26 Q2 (July-September) remains unchanged at 7.1% p.a.

What are PPF Account Withdrawal Rules?

The PPF account withdrawal rules are the criteria provided by the government of India that control how and when you may retrieve your invested money. These guidelines balance offering freedom to account holders and supporting long-term savings and retirement planning.

Types of PPF Withdrawal Rules

There are three basic kinds of PPF withdrawal rules:

• Partial Withdrawal Rules
• Premature Withdrawal Rules
• Withdrawal Rules After 15 Years (Maturity)

PPF Partial Withdrawal Rules with Example

Partial withdrawal from a PPF account is possible when the account has been operational for at least 5 years. This option allows account users to retrieve a part of their invested money while keeping the account operational and enjoying the compounded interest advantages.

Here's an example to show PPF partial withdrawal rules:

Suppose you created a PPF account in 2018 and have been making regular contributions. In 2023, after completing 5 years, you need finances for your child's further school fees. You may partly withdraw up to 50% of the amount in your PPF account at the end of the fourth year before the year the withdrawal is made.

If the amount in your PPF account at the end of 2021 (the fourth year before 2023) were ₹5,00,000, you would be allowed to withdraw up to ₹2,50,000 (50% of ₹5,00,000).

PPF Premature Withdrawal Rules with Example

Premature withdrawal from a PPF account is authorised in specified conditions, such as medical emergencies, higher education fees, or a change in residency status. However, it is crucial to remember that early withdrawal may result in a penalty or loss of interest income. It is also important to note that premature withdrawal can be made only after 5 years.

Here's an example to show PPF premature withdrawal rules:

Suppose you created a PPF account in 2018 and contributed consistently. In 2023, you confront a medical emergency and need finances instantly. Subject to specific criteria and penalties, you may prematurely take the total sum from your PPF account.

In case of early withdrawal, Interest in the account will be permitted at a rate 1% lower than the rate at which interest has been credited to the account since its opening or extension, whichever is applicable.

PPF Withdrawal Tax Benefit

• Withdrawal after maturity or on termination is fully tax-exempt.

PPF Tax Benefit

• Contributions to PPF are eligible for deduction under section 80C of the Income Tax Act up to Rs. 1,50,000.
• Interest-credited employees' contribution up to the financial year 2020-2021 is exempted from tax.
• From 1st April 2021, interest credited to the PPF account on employees' contributions if it exceeds Rs. 5 lacs in the financial year, then the exceeding amount of interest shall be taxable under the head "Income From Other Source".

PPF Withdrawal Rules After 15 Years (Maturity) with Example

After completing the 15-year term of a PPF account, you can either withdraw the total accrued value or extend the account for another block of 5 years. There are no fines or limitations if you want to withdraw the money at maturity.

Here's an example of PPF withdrawal rules after maturity:

Suppose you created a PPF account in 2024 with an initial investment of ₹1,50,000 and contribute the maximum authorised amount each year. After 15 years, in 2039, your PPF account will mature, and you can withdraw the whole accrued sum.

Assuming an average interest rate of 7.1% over the 15-year term, your PPF account balance at maturity might be roughly ₹40,68,000 (approximately). Since you have fulfilled the 15-year tenure, you may withdraw all the money without fines or deductions.

PPF Withdrawal Rules After Extension

If you opt to prolong your PPF account for another 5 years after the first 15-year term, you can only withdraw 60% of the balance accumulated at the time of extension over the new 5 year period.