Want to make a partial withdrawal from PPF? Check eligibility and rules here

The Public Provident Fund, which is backed by the Government of India, is one of India’s best-fixed income investment opportunities. Numerous investors can either opt for PPF for tax saving reasons or for retirement portfolio accumulation. As an investing option, even low-risk investors who choose to avoid equity can opt for PPF. A few of the factors that affect the most is partial PPF withdrawals or early closure. Based on eligibility and other rules surrounding it, it enables partial withdrawals. We will include eligibility for partial withdrawals of PPF, eligible amount, and different laws and guidelines for such withdrawals from PPF in this article. 

Know about PPF

PPF is a govt scheme which comes with a tenure of 15 years and also provides assured returns. With an overall cap of Rs 1.5 Lakhs during a financial year, one can invest as little as Rs 500 every financial year. Every 3 months, the interest rates are adjusted by the Government of India. You can also deposit a total of Rs 3 Lakhs per year along with your spouse (each Rs 1.5 Lakhs per year) and get nearly Rs 94 Lakhs (depending on interest, this amount can vary) over a 15-year maturity period. With several terms and conditions, it provides partial withdrawals. We would only concentrate on partial withdrawals from the PPF below.

Eligibility required for making partial withdrawals from PPF

• After 5 years of PPF opening, partial withdrawals are permitted.
• After this specified period, PPF holders are entitled to withdraw 50 percent of the PPF amount. This 50 percent is determined on the basis of a lower PPF balance at the end of the previous financial year, or 50 percent of the PPF balance at the end of the preceding fourth fiscal year.
• Form C should be submitted to the bank or post office where their PPF is active. They must provide the number of the PPF account plus the amount to be withdrawn and include their signature in that form. At the bank or post office, you must submit a Form C plus PPF passbook. If you have access to an online PPF account, you can visit the online banking portal and make a partial PPF withdrawal request.
• If the PPF account is opened, the bank / post office can verify the request, eligibility and amount and then accept the request. The balance will be transferred to the PPF account holder’s bank account, or DD would be given for the amount unless the savings account is not accessible for any reason.
• From the seventh year onwards, the PPF law allows one withdrawal per year.
• In the hands of investors, PPF partial withdrawals are exempt from tax.
• For a block duration of 5 more years, the PPF holder can extend their PPF account beyond 15 years. In such a scenario, a partial withdrawal of 60% of the balance that was eligible during such an extension can be made.

How PPF withdrawal amount is calculated?

Let me illustrate this with an example. A PPF account is opened with Rs 50,000 in January 2011. From fiscal year 2016-17, the eligibility to withdraw PPF will be (5 years). Here is how it determines the worthy amount. 

• Rs 3.4 Lakhs x 50 percent = Rs 1.7 Lakhs = 50 percent of the balance as of the end of the fourth year of account opening.
• 50 percent of balance of preceding year ending – Rs 8.4 Lakhs x 50 percent = Rs 4.2 Lakhs