PPF withdrawal new rules 2016 – Premature closure Allowed

PPF Premature closure

The finance ministry has recently changed norms of PPF withdrawal and premature closure. As per new rule premature closure and withdrawal of PPF is allowed under circumstances such as a medical emergency or requirement of money for education purpose. This change will give big relief to PPF subscriber who is in genuine need of money. Let’s take a look at new PPF withdrawal & premature closure rules and its impact on PPF subscribers.

PPF withdrawal and premature closure New Rules

Old PPF withdrawal and closure Rules –

  • As per old PPF withdrawal rules you can carry out the partial withdrawal of PPF amount up to 50%, after completion of the 7th financial year from the date of opening PPF account.
  • No reason will be asked for such withdrawal.
  • Partial withdrawal is allowed only one time per financial year.
  • You cannot close your PPF account till maturity (15 years) except the death of account holder.

old ppf withdrawal rule

New PPF withdrawal and closure Rules –

  • No changes are made for the partial withdrawal of PPF amount. However, following rules are added for the premature closure of PPF account.
  • You are allowed to close your PPF account by submitting written application to the account office under following conditions –
  • If money is required for the treatment of life-threatening diseases of the PPF subscriber, spouse or dependent children. A supporting document from competent medical authority is required along with your application.
  • If money is required for the higher education of the account holder or for the minor account holder. You need to enclose documentary evidence such as fee receipt and letter of confirming admission from the recognized institute India or Abroad.
  • This type of premature closure is permitted only after the account has completed five financial years.

PPF withdrawal new rules 2016 – Premature closure Allowed

In case you opt for premature closure of PPF account you need to be ready to accept the applicable penalty. As per new PPF rule 1% interest penalty is applicable for PPF account closure.  This means you will be paid 1% less interest on the interest rate applicable from time to time on the deposits held in the account.

Suppose you opened a PPF account in 2006 and due to medical emergency you are planning to close your PPF account now. Following calculation will help you to know how much impact 1% interest penalty will make on your PPF outstanding.

ppf-without-premature-closure-calculation

ppf-new-rule-premature-closure-calculation

Positive

  • The PPF account holder who requires money for the medical emergency or higher education can close the PPF account at an early stage.
  • Partial withdrawal rules are intact that is good for PPF account holder.

Negative

  • The Penalty of 1% is applicable on premature closure of PPF account.
  • Premature closure is permitted only after completion of the fifth financial year.

Over to You –

The new rule of PPF withdrawal and premature closure is good for the PPF investor who is genuinely looking for money in case of medical emergency or higher education. However, as per the calculation penalty of 1% is making considerable difference in the maturity amount.

As per me, you should carefully look at another avenue for getting fund rather than premature closure of PPF account.

Do share your opinion on the new PPF Premature closure rule.

For more information go through Notification issued by Finance ministry.

Article by Raviraj

Hi, I am Raviraj. I am passionate about money matters and finance. I have 10 years of rich experience in the field of financial planning, Investments & Insurance. I have written 850+ article on this blog. If you like my efforts kindly subscribe to this blog and also let your friends know about this website by sharing.

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