Do you have to shut or prolong your PPF account after 15 years of lock-in interval?

Naveen Kukreja, Co-Founder & CEO of Paisabazaar

Present PPF depositors who don’t have any urgent want for cash ought to prolong their PPF A/c after the completion of the 15-year lock-in interval. Contemporary contributions of as much as 1.5 lakh inside a monetary yr within the prolonged PPF Account would qualify for tax deduction below Part 80C. The curiosity revenue from PPF can also be tax-free and is compounded on a quarterly foundation. 

Furthermore, being managed by the Union Ministry of Finance, PPF account comes with sovereign assure, the very best type of capital safety accessible to any investor. Partial liquidity can also be provided to the prolonged PPF Accounts because the depositors can withdraw as much as 60% of the PPF stability (held on the time of account extension), both in a single or in yearly instalments.

Word that the extension of PPF A/c is allowed within the block of 5 years and so forth. To increase their account, PPF depositors should notify and submit Kind 4 to the involved submit workplace or financial institution inside 1 yr of the account maturity. 

Rajani Tandale, Product Head – Mutual Fund

When contemplating closing your PPF account after the 15-year lock-in interval, it is important to have a transparent understanding of your monetary targets and liquidity wants. In the event you want the cash instantly for any motive, equivalent to a monetary emergency or to fulfill any vital monetary purpose, closing the PPF account may very well be a viable choice.

Nonetheless, should you can afford to depart the cash invested for some extra time and do not require speedy entry to the funds, extending your for a block of 5 years may very well be a greater choice, as PPF continues to earn curiosity even after maturity.

PPF gives 7.1% tax free returns which is a sexy price of return in fastened revenue basket, whereas financial institution FDs and debt mutual funds are taxed as per the tax slabs. PPF falls below the Exempt-Exempt-Exempt (EEE) class, which suggests the funding, curiosity earned, and maturity proceeds are tax-free.

You will need to notice that you could make partial withdrawals from the account after the preliminary lock-in interval, topic to sure situations. Moreover, you may also proceed to contribute to the account through the extension interval.

In abstract, the choice to shut or prolong your PPF account after 15 yr of lock-in interval depends upon your monetary targets and liquidity wants. In the event you want the cash, you possibly can shut the account, however should you can afford to depart the cash invested, you possibly can prolong the account for a block of 5 years and proceed to earn curiosity.

Manu Rishi Guptha, Founding father of MRG Capital, a SEBI registered Portfolio Administration Firm

At present, a PPF account affords a 7.1% rate of interest with 15-year lock-in interval. Although the rate of interest provided isn’t fastened and is about yearly by the Authorities, tax advantages provided by the PPF investments make them a formidable funding choice amongst others. Funding, curiosity earned and redemption quantity are all tax exempted in PPF investments. 

The redeemed PPF quantity could be additional prolonged in the identical PPF with lock in of 5 years. Each other choice is to place the redeemed quantity in a tax free FD which may supply higher returns than a PPF account and supply tax deduction advantages. FDs will supply higher liquidity despite the fact that they’ve 5 yr lock in as banks simply give credit score towards the fastened deposits. Breaking a FD with a financial institution is simpler than breaking an prolonged PPF account. So, it’s suggested to place the redeemed quantity from a PPF account in a tax free FD provided by financial institution.

Aniruddha Bose, Chief Enterprise Officer, FinEdge

We might advise traders towards extending their PPF account after the mandated lock in interval finishes. Regardless of your life stage, there are higher choices accessible. In case your lock in finishes close to your retirement age, you need to ideally arrange a scientific withdrawal plan from a well-planned portfolio of mutual funds, to generate a predictable revenue out of your accrued corpus. 

In the event you nonetheless have a number of years to go until your retirement, you’re higher off investing your PPF proceeds aggressively into equities and maximizing your wealth. In spite of everything, the PPF is actually not way more than an illiquid fastened revenue funding, so it doesn’t absolutely clear up the issue of revenue technology or capital development! A reliable Advisor can assist you propose your PPF proceeds effectively whereas balancing your varied monetary targets and priorities.

Nirav Karkera, Head of Analysis, Fisdom

Extending your PPF account could be clever should you do not require speedy entry to funds, because it presents a profitable alternative for fixed-income funding. The PPF scheme additionally permits you to make investments any extra cash through the 5 years and earn tax-free returns below the EEE standing whereas benefiting from compounding. It is price noting that traders can prolong their PPF account with or with out additional contributions for a block of 5 years. 

This flexibility permits people to proceed incomes curiosity on their present stability whereas having the choice so as to add extra funds in the event that they select to take action. Two extra vital caveats is that the financial institution or submit workplace should be intimated concerning the intention to increase in a well timed method and just one withdrawal transaction could be made in a single monetary yr through the five-year extension. For traders who don’t want the cash upon maturity, extending the tenure could also be a prudent selection. The tax effectivity, liquidity and glued curiosity construction strengthens this case for an extension.

CA Manas Chugh, knowledgeable in Funding and Taxation, Osgan Consultants

Closing of the PPF Account depends upon the Monetary Purpose of the individual. As the speed of curiosity on PPF is 7.10% which is quarterly reviewed, it permits the individual to have sure allocation on Mounted Revenue funding. After 15 years, an individual can prolong for a block of 5 years with recent deposits or with out recent deposits. The extension permits an early withdrawal choice however with limits. Because the lock-in interval is shortened, subsequently, individuals who have emergencies of money ought to shut the account, in any other case, the account permits price of curiosity and diversification of funding.

Juzer Gabajiwala- Director, Ventura Securities

In my opinion, funding in Public Provident Fund Account (PPF) ought to be part of your Asset Allocation. Thus, you need to prolong your PPF account in blocks of 5 years particularly should you belong to 30% tax bracket and the present rate of interest of seven.1% p.a. stays tax free. 

Moreover, PPF has the backing of the central authorities and affords fastened returns, thus making it a risk-free funding. Nonetheless, should you belong to 0% tax bracket; it’s possible you’ll take a look at different fastened revenue merchandise that may give you greater than 7% p.a. returns. 

Atul Sharma, Founder, Lex N Tax

You probably have a PPF (Public Provident Fund) account and it has accomplished its lock-in interval of 15 years, you may have two choices: shut the account or prolong it.

Closing the account means withdrawing the whole stability together with the accrued curiosity. You should use the funds in your monetary targets or make investments them in different monetary devices. Nonetheless, should you shut the account, you won’t be able to benefit from the tax advantages that include investing in PPF.

However, you possibly
can select to increase the PPF account after the completion of 15 years for a block of 5 years. Throughout this prolonged interval, you possibly can proceed to contribute to your PPF account and earn tax-free curiosity on the stability. The utmost deposit quantity right into a PPF account is Rs.1.5 lakh per monetary yr.

So, whether or not you need to shut or prolong your PPF account after 15 years depends upon your monetary targets and wishes. In the event you want the cash for some pressing monetary requirement, you possibly can contemplate closing the account. Nonetheless, if you don’t want the cash instantly, and wish to proceed incomes tax-free curiosity, you possibly can decide to increase the account.

Maitry Shah, the founding father of LakshMe, the CSR initiative of the Prudent Group

Closing and increasing the PPF account depends upon the efficiency of different funding merchandise in your portfolio, if any. You probably have different funding choices that provide higher returns, it might make sense to shut the PPF account. However, if you wish to proceed with the account and are snug with the rate of interest, it’s possible you’ll select to increase it. Remember that the PPF affords tax advantages below Part 80C of the Revenue Tax Act, and the curiosity earned can also be tax-free.



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