What happens to a PPF account after the account holder’s death? Nominee rules, withdrawal process explained

A Public Provident Fund (PPF) account is a long-term savings scheme backed by the government, where investors can contribute funds on a monthly or yearly basis to build a tax-efficient corpus over time. But, some people may wonder what happens to the funds after the account holder's death.

While the savings scheme offers assured and risk-free returns, its rules after the account holder’s death are governed by strict provisions laid down under the scheme, which comes with certain restrictions.

What happens after account holder's death?

In case of death of the account holder, the PPF account shall be closed, and the nominee or legal heir can claim the balance available in the account after submitting the prescribed documents to the bank or post office. Once the claim process is completed, the entire eligible balance is paid to the nominee or legal heir, and the account is closed permanently.

The rules also say that no fresh contributions can be made after the account holder's death, and the account cannot be extended or operated further in another person's name or on behalf of the late account holder.

However, the existing balance in the account does not stop earning interest right away. It continues to earn interest until the end of the month preceding the month in which the money if finally paid to the nominee or legal heir.

A PPF account holder is allowed to declare one or more individuals as their nominee. However, the maximum number of nominees allowed is four. Meanwhile, the account holder also has the option to modify nominee details.

Earlier, a fee of ₹50 was being levied by financial institutions and post offices for updating/modifying nominee details in PPF accounts. However, now PPF account holders are not required to pay the fee.

What documentation is required for withdrawing the funds?

In order to claim a withdrawal after the holder's death, the initial process involves collecting the following documents:

• Death certificate: A certified copy of the death certificate of the PPF account holder must be produced to make a claim.
• Claim form: The nominee or legal heir is required to fill out Form G for claiming the PPF balance after the subscriber's death.
• Identity proof: Identity proofs of the nominee or legal heir is required.
• Proof of relationship: If the claim is made by legal heirs, proof of relationship with the deceased must be established via succession certificate, will, or legal heir certificate.

Benefits of having a PPF account

PPF currently offers an interest rate of 7.1% per annum, which is revised on a quarterly basis and compounded annually. A depositor can invest a maximum amount of ₹1.5 lakh in the savings scheme every financial year. Each account holder must make a minimum contribution of ₹500 each year. These contributions can be made either on a monthly or annual basis.

The maturity period of PPF is fixed at 15 years. However, if you wish to continue making contributions or earning interest, you can do so by extending the account's tenue in blocks of five years, as many times as you want. This extension can be done with or without making any contributions.

The government-backed scheme enjoys one of the most favourable tax treatments among investment options in India, as it falls under the EEE (Exempt-Exempt-Exempt) category. This means that contributions made to a PPF account are eligible for tax deduction under Section 80C of the Income Tax Act, up to ₹1.5 lakh in a financial year.

Additionally, the interest earned on investments is completely tax-free, making it an attractive option for long-term savers looking to maximise post-tax returns. Apart from that, the maturity proceeds withdrawn from a PPF account are also entirely exempt from tax, ensuring investors receive the full benefit of their accumulated corpus without any deductions.