A Public Provident Fund (PPF) account has a 15-year maturity period, after which investors can withdraw the principal plus accrued interest. The maturity is calculated from the end of the financial year in which the account was opened, rather than from the exact date of the first deposit.
For example, if you opened a in November 2011 (FY 2011-12), the account will mature on 1 April 2027. This is because the 15-year maturity period was counted from 31 March 2012 in this case.
However, the maturity date may fall on a weekend, and depositors can also delay withdrawing the money because they forgot about the account or were unaware of the deadline. What happens in such cases? Let’s find out.
Does PPF lock in for another 5 years if not withdrawn?
No, after the 15-year maturity period, there are no penalties or restrictions on withdrawals, but only for a limited time.
A PPF account holder must submit Form 4 (or Form H at some institutions) to their bank or post office within one year of maturity to extend the tenure of their account and keep making contributions. This is mandatory and failing to do so can affect liquidity, withdrawal flexibility and future deposits.
An investor can extend the tenure of their PPF account in 5-year blocks, as many times as they want.
What if you don’t take any action?
If you don’t submit Form 4 within one year of the PPF account’s maturity, the account will continue in 5-year blocks by default. However, fresh contributions are not allowed in such cases.
The existing balance continues to earn interest at the applicable rate (currently 7.1% per annum), and you can withdraw money only once per financial year.
Form 4 can be downloaded from the website of the bank where you have your PPF account. The form is also available at the bank branch or post office where you have the PPF account.
Post-maturity options
PPF, which is a government-backed long-term savings scheme, enjoys one of the most favourable tax treatments among investment options in India, as it falls under the (Exempt-Exempt-Exempt) category. This means eligible contributions, interest and the maturity amount are all exempt from tax.
Once the 15-year period ends, an investor can choose what to do next from these three main options:
- Complete withdrawal: You can permanently close the account and withdraw the entire tax-free corpus.
- Extension without deposits: The account continues to earn interest on the existing balance. You are allowed one withdrawal per financial year.
- Extension with deposits: Extend the account in 5-year blocks by submitting Form 4 within one year of maturity.
The decision to close or extend your PPF account should depend on an individual’s immediate financial needs. If you have an urgent requirement for the money, then a withdrawal can be made. However, if you don’t need the capital right away, extending the account is advisable as it gives long-term returns.