Is Your PPF Maturing? Know Your Options
Is your Public Provident Fund maturing? Read this space to know what to do with your PPF account once it matures.
In this final piece of the 3 part article on the PPF, we cover what to do with your PPF account after maturity and more useful information on the Public Provident Fund.
Let's get started:
1. You can continue your account with deposits after maturity i.e. you can extend your account.
Few people know this, but the PPF account has no limit on how many times it can be extended after the initial 15 year block matures. Yes, there is a 15 year lock in, but then you can extend it for periods of 5 years at a time, indefinitely. Your account continues to operate normally i.e. you make deposits of up to Rs. 1 lakh, earn interest and renew after 5 years if you wish. Everything remains E-E-E. To extend by a block of 5 years, use Form H.
Keep in mind that banks themselves are not aware that there is no limit on the extension. If you ask the bank official, you will likely be informed that you can extend it only twice, for 2 blocks of 5 years each. However there is no such limit announced by the Government.
In our previous article i.e. part II in this series; we covered the details of extending your account with making further deposits, which is also an option.
If you choose to leave your funds in the account, they will continue to earn interest for as long as they lie in the account. Interest will continue to be paid on your account and you will receive the total amount including interest up to the last month preceding the month in which you apply for a withdrawal, using Form C.
2. You can withdraw, even if you choose to extend...
If you choose to extend by subscribing for a 5 year block, you can make partial withdrawals (using Form C again) of up to 60% of the amount standing at your credit at the beginning of this 5 year block period. So you do have some degree of liquidity.
3. At any point in your life, you are allowed to have only 1 PPF account in your name.
You can also have an account in the name of a minor child of whom you are the parent / guardian. However that will be the child's account, you will simply be the guardian.
If at any time it is seen that you have more than 1 account in your own name, the second account will be deactivated, and only your principal will be returned to you. you cannot have more than 1 PPF account in your name.
4. If you choose to take a loan against your PPF account, you can repay it within 36 months from the 1st day of the month following the month in which the loan was sanctioned. So if your loan is sanctioned in June 2012, the following month is July 2012, and you have until end July 2015 to repay your loan. The interest rate charged is 2% p.a. over the prevailing PPF interest rate.
There's a lot to know that can help you know more about your PPF account. And if past rate changes are anything to go by, you can expect 8.80% interest to not last forever. As it stands today, the PPF remains E-E-E, so make the most of it to add to your retirement corpus.
PersonalFN is a Mumbai based Financial Planning and Mutual Fund Research Firm