The Public Provident Fund (PPF) is a long-term savings scheme with a lock-in of 15 years. However, investors may need access or withdraw funds before maturity. This can be done in two ways:
- Partial Withdrawal – limited access after a few years.
- Premature Closure – complete closure before 15 years under special conditions.
Both options are very different. Let’s understand Partial Withdrawal vs Premature Closure in PPF in detail.
Partial Withdrawal from PPF
- Allowed after completing 7 financial years.
- You can withdraw up to 50% of the balance at the end of the 4th year or the preceding year (whichever is lower).
- Only one withdrawal per financial year is allowed.
- The account continues to remain active after withdrawal.
- Interest is still earned on the remaining balance.
Example:
If you opened a PPF account in April 2015, you can make your first withdrawal in FY 2022-23 (after 7 financial years).
If your balance is ₹4 lakh, you can withdraw up to 50% = ₹2 lakh.
Premature Closure of PPF
- Allowed only after completing 5 financial years.
- Permitted under specific reasons:
- Serious medical treatment (self or family)
- Higher education (self or child)
- Change in residency status (becoming an NRI)
- Full account closure is allowed, but with a penalty.
- Penalty: 1% lower interest rate on the entire balance (retrospective reduction).
Example:
If your account earned 7.1% interest for 8 years, and you close it prematurely, the interest will be recalculated at 6.1%. You lose 1% per year on the whole balance.
PPF Partial Withdrawal vs Premature Closure – Key Differences
| Feature | Partial Withdrawal | Premature Closure |
|---|---|---|
| When Allowed | After 7 financial years | After 5 financial years |
| Amount | Up to 50% of balance | Full balance |
| Frequency | Once per financial year | One-time closure |
| Account Status | Continues till maturity | Closed permanently |
| Conditions | No special reason required | Only for medical, education, or NRI |
| Penalty | No penalty | 1% lower interest on entire balance |
| Best For | Short-term needs without breaking account | Emergency or unavoidable situations |
Which Option Should You Choose?
- Partial Withdrawal is better if you need limited funds and want to keep the account running for long-term benefits.
- Premature Closure should be used only in unavoidable situations since it reduces your overall returns.
FAQs on PPF Withdrawal and Closure
1. When can I withdraw money from my PPF account?
PPF is meant for long-term saving. You can:
- Take partial withdrawals after a few years
- Get the full amount at maturity (after 15 years)
- It rewards patience.
2. Can I withdraw money before 15 years?
Yes, but only partially.
Partial withdrawals are allowed after completion of a specific lock-in period
You cannot withdraw the full amount before maturity
3. How much money can I withdraw partially from PPF?
The amount depends on your balance from earlier years.
Banks calculate it as per government rules, not randomly.
4. Is there any tax on PPF withdrawals?
No.
Partial withdrawals are tax-free
Maturity amount is also completely tax-free
5. How do I apply for PPF withdrawal?
You can apply:
- Online (if your bank offers it)
- Offline by submitting the withdrawal form at the bank or post office
6. What documents are required for PPF withdrawal?
Usually, you need:
- PPF withdrawal form
- Passbook or account details
- Identity proof (if asked)
7. Can I close my PPF account before maturity?
Yes, but only in specific situations, like:
- Serious medical treatment
- Higher education needs
- Change in residential status
8. Is there any penalty for premature closure?
Yes.
The interest rate is reduced slightly
The final amount becomes lower than normal maturity value
9. What happens after 15 years when PPF matures?
You have three options:
- Withdraw the full amount and close the account
- Extend the account with fresh contributions
- Extend without adding new money and just earn interest
10. How long does it take to receive money after withdrawal or closure?
Usually, the amount is credited within a few working days, depending on the bank or post office.
Leave a Reply