Is it wise to extend public provident fund (PPF) account after maturity — explained
Public provident fund: After the 15-year maturity period, an investor can extend their PPF account in five-year blocks for an infinite number of times
PremiumPublic provident fund or PPF account is a Government of India or GoI-backed small saving scheme, which is hundred per cent risk-free. This investment tool has been designed in such a way that it helps an investor meet its long-term investment goals like higher studies of child or financial requirements post-retirement. A PPF account falls under 'EEE' category as it allows an investor to claim income tax exemption on maximum deposit limit of ₹1.50 lakh in single financial year and PPF interest earned on one's deposit is completely exempted from any income tax outgo. Currently, PPF interest rate announced by the GoI for April to June 2023 quarter is 7.10 per cent.
Though, PPF account has a maturity period of 15 years, an investor can extend its account in five years blocks for infinite number of times. Most importantly, after extension of PPF account post-maturity, one will be able to withdraw 60 per cent of the PPF maturity amount in case there is any financial emergency arises before completion of five year extension. So, it becomes quite tricky whether one should withdraw PPF maturity amount after 15 years or one should extend PPF account for next five years.
PPF withdrawal vs PPF account extension
On what an investor should do after maturity of PPF account, Pankaj Mathpal, MD & CEO at Optima Money Managers said, "PPF accountholders are allowed to extend one's account in five year blocks for infinite number of time after 15 years maturity. However, for that they need to submit Form H at their bank of post office where they have opened their PPF account. But, extension offer can be exercised when there is no need for any big amount. As PPF is tax exempted, PPF withdrawal should be the last option and one should try to continue investing in PPF as it helps an investor beat bank fixed deposit (FD) return with ease and it is 100 per cent risk-free."
PPF withdrawal rules after extension
On PPF account extension would lead to blockage of one's PPF maturity for next five years, Pankaj Mathpal said, "PPF account extension doesn't mean blocking your PPF maturity amount. As per the PPF withdrawal rules, an investor is allowed to withdraw up to sixty per cent of the PPF maturity amount at the time of exercising PPF account extension. This means, if an investor extends PPF account for next five years after 15 years maturity, one would be allowed to withdraw 60 per cent of the PPF maturity amount after 15 years maturity."
Speaking on PPF account extension rules, SEBI registered tax and investment expert Jitendra Solanki said, "While going for PPF account extension, an investor has two options — earning interest without contribution and earning interest with contribution." Solanki said that one should opt both interest and investment option as it helps an investor to get maximum compounding benefit. He advised PPF account holders to keep on extending PPF account period after maturity as it gives higher returns than bank FD and other risk-free investment instruments.
How to earn maximum PPF interest?
"By extending PPF account beyond 15 years of maturity allows an investor to create a retirement corpus that can help him meet the financial requirements after retirement," said Solanki adding, "One should invest in PPF account by 4th of any month as it would enable the investor to get interest for that month as well."
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