Is it wise to remain invested in PPF account without contribution after 15-year lock-in?
2 min read 09 Apr 2023, 09:39 AM ISTOnce the account is continued without deposits for more than a year, the account holder shall not have the option again to continue the account with deposits
PremiumIf the matured amount in a PPF account after 15-year period is kept without further annual contribution. Will it not be a better proposition looking at the fact that the interest earned is attractive and tax free too. Is it mandatory to close the PPF account? Whether the subscriber is permitted to keep the balance in PPF account without any further annual contribution? If yes, does one earn the interest on the account balance annually at the PPF rate? Is such interest income exempt usual PPF interest? If answers to the two Q are in affirmative, why one should close the account and withdraw the amount from PPF account?
Answer: A PPF account holder has two option after the same has matured on completion of 15 years. Either you can extend the account for another block of five years “with contribution" option by submitting Form-4. Or you can retain your account after maturity without making any further deposits for any period. Please note that the balance in your account will continue to earn interest at the rate applicable to the Scheme from time to time. You can make maximum one withdrawal every year of any amount. Once the account is continued without deposits for more than a year, the account holder shall not have the option again to continue the account with deposits. This option has to continue the account with balance has to be exercised within one year from completion of five years.
The rate at which interest will be paid to you is the same under both the options. The interest earned under both the option is tax free in your hands. So in case you do not need the money immediately, it certainly makes sense for you to continue the account without contributing as long as you want. You can withdraw the either partial or full any time but only once in a year. The decision whether to let the money remain in the PPF account after its maturity is not determined only because it earns higher tax free returns. There are other considerations like need of the money or alternative avenues for deployment of the money at higher after tax returns etc. which ultimately decide whether one retains the money in PPF account after maturity or he withdraws it on maturity.
(Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on his twitter handle)
