You may wonder if it is possible to withdraw money from your PPF account before maturity. You can take out money from your provident fund account. But there are certain rules governing the public provident fund account.
Let us learn about them.
We all know that PPF account needs to be maintained for a minimum of 15 years. So, you get your deposited savings along with earned interest at the time of maturity on the completion of 15 years.
But there could be life situations where you need funds and you look towards your PPF funds. So, the PPF rules have the provision to make partial withdrawals without making an exit.
The PPF rules say that you can withdraw funds in two ways. Firstly, if you have completed 6 years in PPF savings, you can straight away apply for a partial withdrawal and receive the funds in your bank account. But if in case you are yet complete 6 years, then you can request for a loan against PPF fund balance.
Why to withdraw from PPF
I always thought that I would never have to withdraw money from PPF until maturity but I was wrong. I found it convenient to go to the bank and fill partial withdrawal form and receive the funds the same day in my savings bank account.
I wanted to arrange funds to pay for the margin money required towards purchase of a house. Of course, the rest will be through bank loan. There could be other contingency like there could be a medical emergency or there may be a scenario where you may be required to cough up a large sum and the PPF funds may help you to tide over the crisis period.
So, I now consider as I have realized that my PPF account is a reliable partner willing to help me anytime financially. You may be having other investments like insurance policy or mutual funds but they may not be available for immediate redemption.
The second scenario
The second scenario that I told you is when you have not yet completed 6 years. In that case what you can do is you can apply for a loan against PPF. The PPF rules allow to apply for a loan from the 3rd and until the 6th year.
As you would be taking loan on your PPF, you will need to pay an interest. But, don’t worry much. The interest rate on loan against PPF is 1% above the prevailing interest rate. So, if the rate of interest is 7.1% per annum(p.a.). then you will pay 8.1% p.a. So, effectively just 1%!
Thus, the loan against PPF account is available between the 3rd and 6th year. The 7th year onwards of course, you will be able to make partial withdrawals straight away.
Tax on Partial Withdrawal
This partial withdrawal made from PPF is also tax free. The income tax department won’t ask you to pay any tax on the principal or the interest earned. How nice it is!
