The Public Provident Fund (PPF) is among India’s most well-liked savings schemes for long-term savings. It promises good interest rates, security, and tax benefits, hence preferred by investors. But since PPF is a long-term scheme, it has an eternal lock-in of 15 years.
But if someone needed to prematurely shut the PPF scheme on account of unforeseen circumstances, what would the procedure be in terms of rules, conditions, and steps to be followed?
PPF Account Early Closure?
The closing of the PPF account before five years is not permitted. After five years of operational existence, premature closure is allowed under certain conditions.
Conditions for Premature Closure of a PPF Account
Since you want to close the PPF account before the completion of 15 years, you ought to satisfy at least one of these conditions. The first one applies in cases of sudden health emergencies. If the account-holder or an immediate family member is undergoing treatment of a life-threatening disease, the account can be permitted for premature closure depending upon the submission of relevant medical records and hospital bills.
The second condition is in cases where the funds are required for higher education. While evidence of admission and fee receipts from a recognized institute need to be provided to authorize the early closure of the account.
The third condition covers cases where a change in an individual’s residential status has occurred in an NRI. In this context, the sale of a PPF account can be accomplished by submitting documented proof such as a visa and passport.
Penalty for Early Closure of a PPF Account
The premature closure is permitted in the above cases, but one penalty is applicable. A sum of deduction to the extent of one percent of interest earned would apply to the final amount withdrawn.
Partial Withdrawals: A Way Out from Premature Closure
If funds are required but none of the reasons qualify for premature closure, there is another option. There is an option of taking partial withdrawal after five years from the date of opening an account. The maximum sum that can be partially withdrawn is 50% of the balance at the end of the 4th financial year preceding the withdrawal. In this way, the account stays alive, and funds can be accessed.
How to Close a PPF Account Before Maturity
If you meet the criteria for closure of a PPF account, then your immediate task will be to visit the concerned bank or post office where your account is held. The first step is the conclusion of Form 5, which is the official PPF account-closure form. Along with submission of the form, one shall have to submit other related documents in support of the reason for closure. Medical reports and hospital bills are required in case of medical emergencies. Higher education requires proof of admission and fee receipts. When a change in residential status clogs the road, one should provide proof such as a visa and passport.
Once your documents are submitted, the relevant bank or post office will verify the information. If everything checks out, the PPF account will be closed, and the remaining balance will be transferred to your linked savings account.
Processing Time
Closure is generally completed within seven to ten working days, depending on the rules observed by respective banks or post offices.
Conclusion
Despite being a long-term-saving instrument, numerous uncertainties in life may need an early withdrawal or closure. In case you find yourself in that situation, ensure you satisfy the eligibility criteria and, in that case, follow all the steps to come out of it.