When the PPF matures, ought to we select closure or extension? Which choice advantages traders extra? Let’s evaluate the related guidelines earlier than deciding.
PPF stands out as one of the best debt instrument for traders looking for stability and progress. But, a major variety of people select to speculate primarily for the tax benefits it gives beneath 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 choice for these trying to safeguard their investments.
When your funding purpose is to save lots of taxes whereas making certain a safe, tax-free maturity quantity, it naturally raises important unclarity for traders. One 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 Lengthen?
To make knowledgeable selections relating to the closure or extension of your PPF after it matures, it’s important to first grasp the related guidelines and laws that come into play. Gaining this understanding will give you the readability wanted to navigate your choices successfully.
I’ve written an in depth put up on this – PPF withdrawal guidelines & choices after 15 years maturity Nonetheless, sharing the identical right here on your profit.
It’s essential to first have readability in regards to the maturity of your PPF account. Refer under picture for extra readability on this facet.
Everyone knows that the PPF interval is 15 years. However in actuality, Â it’s greater than 15 years. I attempted to clarify the identical with the under picture.Â
It’s possible you’ll notice that if you happen to opened the account on tenth August 2015, it wouldn’t mature on tenth August 2030, which might be 15 years later. As an alternative, the maturity date can be 1st April 2031, because the 15-year interval really begins on 1st April 2016. I belief this rationalization clarifies the idea for you.
Now as soon as the account matures, then you have got three choices. They’re defined under.
As soon as the PPF account matures, then you have got three choices. Many really feel that after the PPF account completes 15 years’ tenure then it’s over. Nonetheless, you have got three choices left. I attempted to clarify the identical from the under picture.
1) Closing of PPF account after the maturity or completion of 15 years-
This alternative is well known. We begin by opening an account, making contributions for as much as 15 years, and in the end closing it to withdraw the overall quantity together with the accrued curiosity. Each banks and put up places of work sometimes spotlight this feature whenever you ask in regards to the PPF characteristic. Thus, it may be thought of a standard alternative for many PPF traders.
Whenever you open your account on August 10, 2015, it is going to attain maturity on April 1, 2031. At that time, you may withdraw each your preliminary funding and the accrued curiosity in full. The account will then be closed mechanically. IF you want to make a brand new funding after this account has been closed, you have to to arrange a brand new PPF account.
Are you conscious of this? It’s also possible to take out the cash in installments after it matures. Nonetheless, you might be restricted to a yr to make this alternative. 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 preserve your PPF account, you’ll proceed to obtain curiosity if it has matured and also you haven’t closed it. Nonetheless, such accounts is not going to be eligible for any extra contributions. Moreover, until you shut the present account, you gained’t have the ability to open a brand new one. The account can be mechanically renewed for an extra 5 years (with out the choice to make a contribution) following a yr of ready.
2) Lengthen PPF account with out additional contribution–
The default alternative is that this. This feature can be mechanically enabled if, for instance, 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. Be aware that you’ve one yr from the date of maturity to submit the appliance to increase the account with a contribution for a block of 5 years. If not, this alternative can be chosen for you mechanically.
This would be the default setting for a five-year interval. This suggests that the account will stay open for 5 years if you happen to haven’t requested to increase it with a contribution or closed the account. The account that matures on April 1, 2016, as an illustration, will mature on April 1, 2021. After that, if neither the account was closed nor an utility was made to increase it with out making a contribution, the account can be prolonged for an extra 5 years. It has no bounds to it. You’ll be able to nonetheless profit from incomes curiosity on the accessible steadiness in this sort of account. Nonetheless, you aren’t permitted to make any extra contributions to one of these account. After a yr of the primary alternative, neither of you is permitted to switch it.
Essentially the most advantageous facet of this feature is the absence of any limitations on withdrawing the steadiness all through this era. You’ve gotten the suitable to withdraw any quantity current in your account at any time with out restrictions. The steadiness will proceed to accrue earnings. Nonetheless, this feature could solely be utilized as soon as per yr.
3) Lengthen PPF account with additional contribution–
After the account reaches maturity, you have to full Type H and submit it to the put up workplace or financial institution the place your PPF account is held. You will need to word that the appliance have to be submitted earlier than the completion of 1 yr from the maturity date. As an example, if the account matured on 1st April 2016, you have to train this feature by thirty first March 2017. Failure to take action will end result within the activation of the second choice talked about above by default. Upon submission of the shape, the account can be prolonged for an extra 5 years.
In case you have not opted for this feature however proceed to contribute as regular, then such a deposit quantity neither earns any curiosity not eligible for Sec.80C tax profit. To regularize it, it’s a must 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 feature, you gained’t have the ability to change again to the second choice talked about earlier. Some individuals are reluctant to return to the second choice talked about earlier, primarily as a result of accessible liquidity. This feature doesn’t enable for a similar stage of freedom to withdraw the steadiness because the second choice.
On this alternative, you may withdraw 60% of the steadiness in the beginning of every prolonged interval (a block of 5 years). As an example, if the account matures on 1st April 2016 with a steadiness of Rs.1 Cr, you may withdraw 60% of this quantity through the 5-year block, i.e., Rs.60 lakh. The withdrawals may be Rs.20 lakh within the first yr of extension, Rs.10 lakh within the second yr, Rs.5 lakh within the third yr, and so forth till the 5-year extension matures. Within the above instance, the overall withdrawal restrict is Rs.60 lakh, which may be withdrawn in a single withdrawal or in yearly installments. Nonetheless, just one withdrawal is allowed every monetary yr.
This rule applies to the subsequent block of 5 years extension once more.
Be aware that, for the primary block of 5-year extension if you happen to opted for the third choice, then within the subsequent 5-year block interval, you may go for the 2nd choice with out submitting Type H. So you might be free to decide on the choice after each such extension.
When analyzing the PPF post-maturity options, it turns into evident that choosing a 5-year extension with contributions is far more advantageous. It’s because it gives liquidity over the prolonged interval and the next 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 supply the identical stage of liquidity through the prolonged interval.
Nonetheless, in case your monetary purpose is close to the maturity of PPF and you might be counting on this PPF account to fund the purpose, then you haven’t any choice however to shut the account. Therefore, take a name on whether or not to shut or prolong based mostly in your monetary purpose slightly than simply abruptly closing or extending.
