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A popular investment option to save taxes under Section 80 (C), Public Provident Fund (PPF) is a long-term investment tool which helps you to save taxes not only on the amount of money you deposited but also on the interest earned thereof. Backed by the government, PPF is designed as a savings tool for small investors as the maximum amount of money that can be put into the account cannot be more than ₹1.5 lakh in a financial year.
PPF accounts mature in 15 years. Here are 5 things you should know if you have a PPF account which is due to mature in the next few years.
1) Upon completion of the 15-year investment period, you are free to withdraw the full amount from your PPF account and close it. Get Form C from your bank or post office where the account was held and submit it for closure of account and full withdrawal.
2) Besides closing your PPF account, you also have another option to keep extending it by blocks of five years. You need to collect and submit Form H for extension of your provident fund account.
3) In his new book Financial Affairs Of The Common Man, personal finance expert Anil Lamba advises that you should try to invest the maximum permissible amount ( ₹1.5 lakh) in the years prior to maturity to get all the advantages of tax deduction, a pretty decent interest, tax exemption on the interest, etc.
"The amount deposited in the fourteenth year will come back in two years and the sum deposited in the fifteenth year will come back in one year," says the expert.
4) The PPF scheme follows the fiscal year, that is the period April 1 to March 31, as its accounting year. Even if you had opened the account on March 31, on the very next day one year is over and only fourteen years will be left.
5) Full withdrawal of money is not allowed before the end of the 15-year period except under special circumstances like requirement of funds for serious illness or higher education of the account holder. You are, however, free to make partial withdrawal from the seventh year onwards. The amount of withdrawal is limited to 50% of the balance at the end of the fourth preceding year or 50% of the balance at the end of the immediate preceding year, whichever is less.
