A Public Provident Fund (PPF) account matures after completing 15 financial years from the end of the financial year in which it was opened. After maturity, account holders have the option to either withdraw the full amount, continue the account with fresh contributions, or keep it active without continuing deposits.
However, there may be cases where investors miss the deadline to submit the extension form after maturity. In such cases, the amount in the account remains safe until you withdraw it, but a different set of rules comes into effect regarding contributions and withdrawals.
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.
Here is a detailed explanation of what happens if you forget to extend your PPF account after maturity and the rules that apply thereafter.
What happens if you don’t apply for extension?
A PPF account holder must submitting 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 a mandatory part of the process, and failing to do so can affect liquidity, withdrawal flexibility, and future deposits.
An investor has the option to extend the tenure of their PPF account in blocks of five years, as many times as they want. If you don’t submit Form 4 within one year of the PPF account’s maturity, the account still continues in blocks of five years by default. However, fresh contributions are not allowed in such cases. The existing balance continues to earn interest, and you can withdraw money only once per financial year.
In this case, since you cannot make contributions, you also lose the ability to claim tax deductions on new deposits.
You can download the Form 4 from your bank’s website, such as the (SBI), HDFC, or Bank of Baroda. You can also get it by physically visiting the branch or post office, whichever is convenient for you.
What are the tax benefits of PPF?
PPF, which is 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 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.
Post-maturity options
Once the 15-year period ends, an investor can choose what to do next from these three main paths:
- Complete withdrawal: You can close the account and withdraw the entire tax-free corpus.
- Extension without deposits: The account continues to earn interest on the existing balance indefinitely. You are allowed one withdrawal per financial year.
- Extension With deposits: Extend the account in blocks of 5 years 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.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.