PPF: Know rule for closing account before maturity and if penalties are applicable

A Public Provident Fund (PPF) account is a long-term savings plan made available by the Indian government through authorized banks and post offices. Because of the tax advantages and investment security, it is a well-liked investment choice among individuals. However, one of the crucial guidelines to remember when making an investment in a PPF account is that it has a 15-year maturity period and cannot be closed before maturity.

A penalty must be paid if the PPF account is closed before it reaches maturity. Loss of interest for the remaining time in the PPF account is the price of closing it before it matures. In other words, the investor will get the principle deposited, as well as any interest accrued up to that point, but no more interest will be paid for the remainder of the account's term.

In addition, there is a tax on the interest accrued up to the five-year mark if a person shuts their PPF account early. Because a PPF account can only receive tax-free interest after being open for at least five years.

However, there are a few exceptions to this rule. For instance, a person might be permitted to shut the PPF account before maturity if they become incapacitated and are unable to make further contributions. The account might be closed by the deceased person's nominee or legal heir in a similar way.

It's also important to remember that withdrawals from the account are only permitted after 7 years have passed and are limited to 50 per cent of the balance that was accessible in the 4th financial year immediately prior to the year of withdrawal.

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