PPF: Know the rules to withdraw partially or prematurely from the account

Kolkata: The Public Provident Fund, popularly referred to as PPF, is one of the country's most significant long-term investment schemes which is open to virtually anyone. In fact, parents can open a PPF account in the name of minors, which they have to handle after they turn 18 and can continue it till as long as they want. Though the PPF account has a lock-in period of 15 years, which is also the maturity period of the account, it can be extended by blocks of five years for a virtually unlimited period of time.

The PPF enjoys sovereign guarantee and the capital has the highest degree of safety. The current interest rate on the instrument is 7.1%. It is actually set at 25 to 100 basis points above the average yield of the G Secs of comparable maturity. Despite the design of the instrument to encourage long-term investment, the rules allow one to withdraw funds prematurely. But what are the conditions under which one can do so? Let's have a look.

One can close a PPF account after 15 years have passed from opening the account. That will mean closing on maturity. However, it can also be closed prematurely or one can make partial withdrawals before the lock-in period of 15 years expires. One can do the following:

Partial withdrawal: One can do only five years after opening the account

Extent allowed: 50% of the balance can be withdrawn

Penalty: Nil

Premature withdrawal: One can so do only after five years of opening the account

Extent allowed: Full amount can be withdrawn

Penalty: 1% cut in interest rate payable

Withdrawal after 15 years: Full amount can be withdrawn

Penalty: Nil

Withdrawal after extension: Eligibility after one extension for five year

Extent allowed: Up to 60% of the balance over 5 years; one withdrawal allowed each year.

Full amount can be withdrawn and account closed.