What is Premature Closure of a PPF Account?

Premature closure is withdrawing the sum from a PPF account before its 15-year maturity. This is allowed only after a minimum of 5 years, but with a reduced interest rate.

What happens if I close my PPF account early?

If you close your PPF account before maturity, you will receive 1% less interest than the applicable rate.

What are the exceptions for premature closure of a PPF account?

Exceptions include medical emergencies, financing a child's higher education, moving abroad, or if the account holder dies.

Can I partially withdraw from my PPF account?

Yes, partial withdrawals are allowed for emergencies or specific needs like higher education, but the account must be at least 5 years old.

How can I get more information or resolve issues with my PPF account?

You can contact The Income Tax Department at 1800 103 0025 for queries or assistance with your PPF account.

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Make Wise Investment Choices: Learn Today About Premature Closure In PPF Accounts

Diya Vig

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Updated: 28-01-2025 at 6:32 AM

Make Wise Investment Choices: Learn Today About Premature Closure In PPF Accounts

People’s Provident Fund or more commonly known as PPF is a government investment scheme that helps people contribute and reap its benefits later. Normally, an investment is considered to be mature after 15 years in the PPF Scenario.

However, a few exceptions are provided in case someone wants to withdraw their funds before they are mature. In a specific few scenarios, one can withdraw their sum from the PPF office after 5 years, which is the minimum requirement for withdrawal. Let us learn more about this.

What Is Premature Closure Under The PPF Govt Scheme?

Premature Closure is basically the withdrawal of one’s contributed sum before the maturity age of their account. The sum is withdrawn by closing the PPF account and after the minimum 5 years period has elapsed.

When a person closes their PPF Account, the interest received by them will be 1% lesser than the actual applicable rate. This is the one major implication of closing the account as the total sum received would be lesser due to the cut in interest rate for such withdrawals.

The exemptions under the PPF govt scheme are given in exceptional cases only. Hence, people seeking to withdraw the money in PPF and invest it elsewhere may find it tricky and should ideally refrain from doing so, since the exemptions are available only to a category of specific cases only.

Let us have a look at what these exceptions are!

What Are The Exceptions Available For Premature Closure Of PPF Account?

As per the current rules and guidelines, a person can not close down their PPF account before 5 years from the date of opening an account in that particular financial year. The 5 year limit is not universal and can only be operative in certain cases. The scenarios have been listed down as follows:

In case of a medical urgency or emergency in the family, when money is required for the treatment/surgery of the patient. A person can partially withdraw the sum or opt for a premature closure of the account.
A partial withdrawal can also be opted in case the beneficiary requires the sum to finance their child’s higher education. A premature closure of the account can also be sought, however, the 5 years wait period is a must.
In case the account holder is moving abroad, they can close down their account and withdraw the entire sum.
In case of demise of the account holder, the 5 year waiting period does not remain mandatory. The account can be closed down any time by family members of the deceased.
The amount is redeemed after deducting 1% interest from the applicable interest rate.

What Are The Benefits Of Investing In PPF Account?

Investing in a PPF account is one of the safest investing options available to Indian citizens. It provides a slow yet moderate return on contributions made over a period of time. People looking to get returns without having to opt for high risk investing methods can benefit a lot from this government scheme.

Let us have a glance at the benefits of this investment option:

Stable Returns: Being a government initiative, PPF provides stable returns. The interest rates are revised quarterly and the interest is delivered accordingly.
Tax Benefits: The interest and other returns from PPF investments are exempted under the Indian Tax Regime with other options and benefits available under Section 80C as well. To learn more about how to save taxes, read our article on 20 Ways To Save Tax.
Investment Security: It is a safe investment option and provides stable returns. However, the returns depend on market conditions and rates.
Partial Withdrawal: Partial withdrawal facilities are available under the PPF benefits in cases of emergent and urgent situations.
Loan Facility: PPF balances also act as collaterals for loans. After a few years, the PPF sum can be used as a loan security to obtain loans.
Wealth Creation: The sum deposited keeps accruing interest and turns into a hefty amount. It creates wealth that provides comfort in retirement or to be used for any other personal uses.

Conclusion

Before withdrawing any amount from the PPF account, you must evaluate all the benefits of PPF account investments and consider better options. The fact that premature closure can only be sought in exceptional cases must also be remembered at all times. This government scheme is a safe option for everyone to save.

To resolve any queries or grievances, reach out to The Income Tax Department at 1800 103 0025. Stay tuned to Jaagruk Bharat for more information on related government schemes.

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