Subscribers of the Public Provident Fund (PPF) have the convenience of extending their account after 15 years. This means that after completing a maturity period of 15 years a PPF account can be extended to a block of 5 years. That being said, if the account holder wants to extend the account by making new deposits, the depositor must notify the post office or bank where the account is maintained. For the same, one must fill out a relevant application form and submit it within one year of reaching maturity. After 15 years, one can either extend the PPF account with new contributions or extend the PPF account without new contributions. So, let's take a look at the new account extension rules and procedure for the same.
Extension of PPF account with fresh or new contributions
By submitting Form H with a minimum contribution of Rs 500, the account holder should alert the post office or bank that they wish to continue their PPF account with new contributions. If the account holder fails to submit Form H, the PPF account will be regarded as irregular, and no interest will be charged on new contributions. If the form is not filled and contributions are rendered, the account holder will not be eligible for a tax benefit under section 80C of the Income Tax Act. If the account holder wishes to continue with new subscriptions, he or she can partially withdraw up to 60% of the account balance in one or more instalments at the start of each extended period i.e. a block of 5 years, but only one withdrawal is permitted per year.
Extension of PPF account without fresh or new contributions
If you choose not to make any new contributions to your PPF account after it matures, you do not need to alert the post office or bank by filling out any form. Until you close the account, the balance will continue to accumulate interest. Every financial year, you are entitled to make one partial withdrawal partially with no upper limit. You must notify your bank within one year of the completion of your 15-year of PF tenure if you wish to continue with your deposit. After one year, you can either withdraw your entire balance or make a new contribution towards your PPF account.
Key takeaways of PPF account
- At a Post Office or any public or private bank, one can open a PPF account by submitting the necessary KYC documents and application form.
- The Finance Ministry sets the interest rate on PPF deposits on a quarterly basis. The PPF interest rate has been set at 7.1 per cent for the current quarter.
- PPF investments qualify for a tax deduction up to a limit of Rs 1.5 lakh under Section 80C of the Income Tax Act.
- The minimum amount that can be deposited into a PPF account is Rs.500, with a maximum contribution of Rs.1.5 lakh per financial year.
- PPF deposits have a 15-year fixed maturity term from the end of the fiscal year in which the account was initiated.
- Once the initial 15-year period is over, you can close the account and receive the entire PPF tax-free amount.
- Upon maturity, account holders have the option of extending their PPF tenure for a block of 5 years respectively.
- PPF accounts can also be opened on behalf of minor children. It should be remembered, though, that the overall annual contribution should not exceed Rs.1.5 lakh.
Because PPF contributions provide tremendous value to salaried employees, extending PPF is really not a dumb choice. That being said, unless a large expenditure is scheduled using the funds, one may perceive extending the account due to tax-free interest and the supreme security of the corpus. However, extending a PPF account is a subjective decision that is based solely on the account holder's personal financial behaviour.