PPF or public provident fund accounts mature in 15 years. This long-term government-backed scheme comes with numerous benefits including high-interest rate and tax benefits under section 80C of the Income Tax Act.
Benefits of PPF
- It comes with flexibility in the amount that can be invested. The account can be opened with as little as Rs 100. Yearly investments to keep the account active requires a minimum deposit of Rs 500 with a maximum limit set at Rs 1.5 lakh. This annual deposit can be made in 12 instalments over the year or in a lump sum.
- PPF enjoys exempt-exempt-exempt (EEE) tax status. This means that the amount invested (within the Rs 1.5 lakh limit under 80C), the interest earned and, the maturity amount after 15 years are all tax-exempt.
- You can take a loan against the PPF deposit.
- On maturity, you can choose to withdraw the entire amount or extend the tenure in a block of 5 years (any number times).
How to calculate the date of maturity?
The date on which your first subscription takes place will decide the maturity date and not the date on which your account was opened.
The initial subscription date is based on the financial year. So if you open your PPF account on 3 May 2018, for example, your initial subscription will happen at the end of the financial year 2018-19, which falls on the 31 March 2019. This means your account will mature 15 years after that on 1 April 2034.
You can simply add 15 to the year (2019 + 15 = 2034) to calculate. It always matures on the 1 April of that calendar year.
If you choose to extend the tenure:
- If your PPF account is close to maturity, you should know that you can extend the tenure of the account with or without making further contributions and the amount accumulated will continue to earn interest till the account is closed.
- Those who decide to extend the maturity period should know that they have to submit Form H within a year from the date of maturity.
- If Form H is not submitted on time, fresh deposits in the PPF account will not be eligible for deduction under Section 80C of the Income Tax Act.
What happens when you don't close the account or submit Form H?
A PPF account can be extended without a fresh deposit or Form H. You do not need to inform the post office about it because if the account is not closed after maturity, it is considered extended. However, while the account will be extended indefinitely for 5 years, you are not allowed to make fresh deposits without Form H.
Without the submission of Form H within 1 year of the account's maturity, any interest earned or deposits made during the default extension will be treated as "irregular" and will not be eligible for tax benefits.
Where to find Form H?
You can download Form H from your bank's or India Post's website (wherever you hold a PPF account). The form is required to be filled and submitted at the bank or post office you hold your PPF account with.
Benefits of Form H
On submitting form H, your PPF tenure will be extended by 5 years and you can:
- Make new contributions to PPF account
- Avail tax benefits (under section 80C) on contributions made
- Earn interest on fresh deposits made
- Choose to not make new contributions
- Make one partial withdrawal every year but the total withdrawals throughout the 5-year period should not exceed 60 percent of the account balance at the start of the extended tenure
It is ideally advised to extend the tenure of the PPF account in blocks of 5 years rather than open a new account as it comes with partial withdrawal option.