You can now close your Public Provident Fund (PPF) account and withdraw the entire accumulated amount under certain circumstances, provided the account has completed five years. The new rule came into effect from April 1, 2016.
Earlier, one could withdraw the entire amount only at the time of maturity after the completion of 15 years. Premature closure of the account was possible only in case of death of the person.
Premature closure of PPF accounts shall now be permitted in cases such as serious ailment and higher education of children. However, the person withdrawing has to forgo 1 per cent of the interest earned on deposits as a penalty for premature closure.
The rule on partial withdrawals from PPF account has not been changed. Partial withdrawals from PPF account are allowed once a year from the seventh year. The maximum amount that one can withdraw is 50 per cent of the amount retained in the account at the end of fourth year preceding the year in which the amount is withdrawn or 50 per cent of the balance at the end of the immediate preceding year, whichever is lower.
PPF is one of the most popular small-saving schemes with investment of up to Rs 1.5 lakh eligible for tax deduction. Interest earned on it is also tax-free.