How to withdraw from your PPF in 2024

The Public Provident Fund (PPF) is one of the most popular long-term savings schemes. It offers safety and assured returns while exempting one under Section 80C of the Income Tax Act. Be it for retirement or funding some other future goal, PPF is surely a very attractive scheme.

The withdrawal rules of PPF accounts depend on preconditions like encouraging long-term savings but still allowing flexibility when urgent money is needed. Knowing proper rules would help your decision-making so that you will not be penalized for withdrawing improperly.

Here, we shall cover the latest PPF withdrawal rules in 2024 about partial and full withdrawals, eligibility criteria, time, limits, and key restrictions on a specific type of withdrawal.

PPF Withdrawal Basics

The Government of India introduced PPF to depositors in 1968, which had a fixed rate of interest. Today, that rate is pegged at 7.1% from October to December in 2024. It would be credited to the deposits, which vary from a minimum of ₹500 per annum to ₹1.5 lakh per financial year, and the contributions made into the account come under deduction under Section 80C of the Income Tax Act.

The PPF scheme provides long-term security and withdrawal facilities. These are partial and full withdrawals based on the time elapsed since opening the account. The PPF withdrawal rules have been designed to provide liquidity coupled with incentives to save for the long term.

Partial Withdrawal Rules for PPF 2024

A PPF account can be withdrawn partly and according to the rules and conditions. This partial withdrawal facility is very helpful for investors who may need access to some part of the amount but want to retain the majority of the investments intact and earn interest in the meantime.

1. Eligibility for Partial Withdrawals

The account owner is eligible to make partial withdrawals from a PPF account after five years have elapsed from the opening date of the account.

So, if an account was opened in 2019, partial withdrawals will only be allowed after 2024. This is to ensure that investors hold some investments for some reasonable time before accessing some of their money.

2. Limits on Partial Withdrawals

Partial withdrawal is allowed only up to 50% of the balance on the closing of the fourth year of the financial year or 50% of the balance at the end of the previous year, whichever is lower.

Suppose the account balance at the end of the PPF period in the account in the 4th year is ₹4 lakhs. The previous year’s balance is ₹5 lakhs. Now, the greatest withdrawal is ₹2 lakhs, which represents 50% of ₹4 lakhs.

3. Frequency of Withdrawals

The partial withdrawal facility shall be allowed only once in a financial year. This would prevent misuse of the facility for frequently arising liquidity requirements and, therefore, retain the scheme’s long-term investment character.

4. Documentation and Process

If you want to withdraw partly, you need to submit Form C at the bank or post office holding your PPF account. This form needs to be filled out along with a photo of the passbook of your PPF account. Once the form gets approved, this amount will be credited directly to the savings bank account.

Complete Withdrawal Rules for PPF 2024

The amount in the PPF account can be wholly withdrawn, but this happens only after the account has attained maturity, or in other words, after 15 years have elapsed from the date of opening the account. However, even at that time, an account holder has more options regarding dealing with his funds.

Here are the rules related to the complete withdrawal process for PPF in 2024:

1. Withdrawal Upon Maturity

If the PPF account reaches 15 years of maturity, one is eligible to withdraw the entire balance along with the interest accrued on it. There is no limit on withdrawal, and the procedure for withdrawal from this account at maturity is relatively simple.

2. Extension of PPF Account

Although the PPF account allows a full withdrawal at maturity, many account holders are usually at liberty to have their PPF accounts continue even after the 15th year. These accounts can continue for blocks of five-year periods, and during this time, account holders are allowed to continue earning interest on their remaining balance.

• Without Contribution: With this type of account, one can grow their account and earn interest on the balance they have built without contributing further. An account holder is allowed to withdraw any amount one time in a financial year.
• With Contribution: Individuals can withdraw partially from the PPF account if they still want to contribute the full amount during the extended period. The partial withdrawal rules are the same as in the initial 15-year period: one withdrawal per year and only up to 50% of the previous year’s balance at the end of the fourth year of extension or the previous year, whichever is smaller.

Premature Closure of PPF Account

In extreme circumstances, the PPF scheme permits account holders to close their PPF accounts before the completion of the term. However, this is subject to strict conditions and consequences.

1. Conditions for Premature Closure

The PPF account can be closed only after the completion of five years. The following are the eligible reasons for the premature closure of PPF accounts:

• Medical Emergencies: In case the account holder, spouse, or dependent children require urgent funds for the treatment of fatal diseases, the account can be closed prematurely.
• Higher Education: This account may be closed in case the account holder or their children require funds to pursue higher education, on submission of proof of admission.

2. Penalty for Premature Closure

This third option of premature withdrawal from the PPF account attracts a 1% deduction from the interest rate. Therefore, if the interest earned on the account was 7.1% for the entire period that the account was operational, it is credited with 6.1%.

Loan Against PPF 

This scheme provides partial withdrawal and closure and allows loans against the balance in the PPF account, among other advantages. For those requiring funds but perhaps do not like to withdraw the PPF balance, this can serve as a useful facility.

1. Eligibility for Loans

After three years of active account, individuals can apply for a loan against their PPF account before they reach six years of age. The amount withdrawn under the loan is restricted to 25% of the balance existing at the close of the second preceding financial year of the year for which the loan application is made.

2. Interest Rate on Loans

Loans based upon the amount borrowed from PPF accounts are at 1% more than the prevailing PPF interest. For example, if the PPF interest rate stands at 7.1%, the loan is provided at a rate of 8.1%. Thus, it becomes quite inexpensive compared to most other personal loans offered in the market.

3. Repayment of Loans

A loan availed against a PPF will have to be repaid within 36 months. If the loan is not serviced within the stipulated time, the outstanding amount will be recovered from the balance in the PPF account. After full repayment of the loan, one is eligible for the loan, but it shall be within the gap of six years.

Key Restrictions and Considerations for PPF Withdrawals 

Though PPF is very flexible due to partial withdrawals and loans, there are some other main restrictions and points to consider that the account holders must know and understand.

1. Limited Access to Funds: Given that the lock-in period is at least five years, PPF cannot be used as a tool for short-term savings. Therefore, investors should plan their finances to avoid liquidity problems.
2. Taxation Benefits: The biggest tax benefit of PPF is that any amount withdrawn, partial or otherwise, is tax-free.
3. Penalty for Premature Closure: A 1% cut in the rate of interest at the time of account closure will lead to significant losses in overall returns from the account. Hence, this should be done only in extreme financial emergencies.

How to Manage PPF Account: 3 Key Tips

Here are three important practices to factor in to manage PPF accounts hassle-free:

Tip 1: Plan for Long-Term Goals

Since PPF is a long-term investment, one should plan for long-term goals, which are more suited to retirement planning, children’s education, or building a home. Contributions to PPF should be aligned with these specific goals.

Tip 2: Avoid Frequent Withdrawals

Though it is possible to withdraw partially, it is always recommended to limit the withdrawals so that the corpus builds up. Withdrawal should be done only when there is a genuine need for money.

Tip 3: Utilize the Loan Facility

Instead of withdrawing from PPF accounts, individuals can use the loan facility to meet their short-term monetary requirements. This would ensure that they do not withdraw their investment but keep it intact while solving their immediate financial requirements.

Conclusion

The PPF withdrawal rules for 2024 provide a flexible yet structured approach to managing long-term savings. Partial withdrawals, premature closure, and a loan against balance will give individuals an idea of how to utilize it during urgent fund requirements without compromising on their investments. 

Knowing these rules empowers individuals when they are planning retirement, education, or any other major life event. PPF investments in retirement and education can be optimized maximally with informed decisions when considering the timing and purpose of withdrawals or loans taken against one’s account.

Disclaimer: The information provided is for informational purposes only. Highlight that PowerUp is not responsible for any errors, omissions, or outcomes related to the use of this information.