Public provident fund: Do you have to lengthen your PPF account after maturity?

Public provident fund or PPF account is a Authorities of India or GoI-backed small saving scheme, which is hundred per cent risk-free. This funding software has been designed in such a approach that it helps an investor meet its long-term funding targets like larger research of kid or monetary necessities post-retirement. A PPF account falls below ‘EEE’ class because it permits an investor to assert revenue tax exemption on most deposit restrict of 1.50 lakh in single monetary 12 months and PPF curiosity earned on one’s deposit is totally exempted from any revenue tax outgo. Presently, PPF rate of interest introduced by the GoI for April to June 2023 quarter is 7.10 per cent.

Although, PPF account has a maturity interval of 15 years, an investor can lengthen its account in 5 years blocks for infinite variety of instances. Most significantly, after extension of PPF account post-maturity, one will have the ability to withdraw 60 per cent of the PPF maturity quantity in case there’s any monetary emergency arises earlier than completion of 5 12 months extension. So, it turns into fairly difficult whether or not one ought to withdraw PPF maturity quantity after 15 years or one ought to lengthen PPF account for subsequent 5 years.

PPF withdrawal vs PPF account extension

On what an investor ought to do after maturity of PPF account, Pankaj Mathpal, MD & CEO at Optima Cash Managers stated, “PPF accountholders are allowed to increase one’s account in 5 12 months blocks for infinite variety of time after 15 years maturity. Nonetheless, for that they should submit Kind H at their financial institution of submit workplace the place they’ve opened their PPF account. However, extension supply may be exercised when there isn’t a want for any massive quantity. As PPF is tax exempted, PPF withdrawal ought to be the final possibility and one ought to attempt to proceed investing in PPF because it helps an investor beat financial institution fastened deposit (FD) return with ease and it’s 100 per cent risk-free.”

PPF withdrawal guidelines after extension

On PPF account extension would result in blockage of 1’s PPF maturity for subsequent 5 years, Pankaj Mathpal stated, “PPF account extension doesn’t suggest blocking your PPF maturity quantity. As per the PPF withdrawal guidelines, an investor is allowed to withdraw as much as sixty per cent of the PPF maturity quantity on the time of exercising PPF account extension. This implies, if an investor extends PPF account for subsequent 5 years after 15 years maturity, one can be allowed to withdraw 60 per cent of the PPF maturity quantity after 15 years maturity.”

Talking on PPF account extension guidelines, SEBI registered tax and funding professional Jitendra Solanki stated, “Whereas going for PPF account extension, an investor has two choices — incomes curiosity with out contribution and incomes curiosity with contribution.” Solanki stated that one ought to choose each curiosity and funding possibility because it helps an investor to get most compounding profit. He suggested PPF account holders to maintain on extending PPF account interval after maturity because it offers larger returns than financial institution FD and different risk-free funding devices.

How one can earn most PPF curiosity?

“By extending PPF account past 15 years of maturity permits an investor to create a retirement corpus that may assist him meet the monetary necessities after retirement,” stated Solanki including, “One ought to put money into PPF account by 4th of any month as it might allow the investor to get curiosity for that month as properly.”

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Up to date: 10 Jun 2023, 11:14 AM IST