Due to the lucrative return rates and tax benefits, the PPF or Public Provident Fund has become a very viable investment scheme among risk-free investors. You can start with as low as ₹500 and a maximum of up to ₹1.5 lahks as contributions in PPF, annually.
PPF scheme offers profitable tax benefits under section 80C of the Income Tax Act, as the returns are not taxable. One more advantage of having a PPF account is that you can get a loan against it. This option will be very useful in case a financial emergency occurs.
In PPF your money is locked in for 15 years, despite that you can make partial withdrawals. However, when it reaches maturity you will have to make an important decision to either close the account, claim the contributions or extend it.
These are the Three Alternatives You Will Have When PPF Account Matures:
1. Account Closure With Full Withdrawal
Only after 15 years your option to cancel the PPF account becomes active. You can withdraw the entire corpus at the time of closure by submitting the duly filled Form C at the post office or bank branch. Further, the bank or post office will proceed with the closure and your amount will be transferred to your bank account.
Note: After this you will have two more options: either to extend the account with fresh contributions or without it.
2. Extend the Scheme Without Fresh Contributions
Post maturity you can choose to extend the term of your PPF account to continue to earn interest without fresh deposits. You can choose to extend your PPF account for the next five years. But remember, after this decision, not making new deposits will not be a choice, it will be a strict rule, and will not be allowed. You cannot even switch to an extended account with contributions if you have proceeded with the PPF account without making fresh contributions for more than a year. However, you will be allowed to make partial withdrawals from the account once every financial year.
3. Extend the Scheme With Contributions
Before the end of the last year of maturity, you will have to notify the branch, by filling out Form H, that you wish to extend the scheme period with new contributions. By filling this form your deposits will be treated as irregular and no interest will be paid.