Is premature closure of PPF Account possible?
Yes, it is possible. The Government made this more flexible enough in order to make it popular. Government allows you to close your PPF account before the maturity period i.e. 15 years.
Earlier also the PPF account holders were allowed to close it pre-maturely, but only in case of death the account holder. But now it is more flexible and can be closed pre-maturely three reasons.
What are the reasons Govt allows the holder to close the account pre-maturely?
The Government has listed three reasons for closing the PPF account before completion of maturity. Reasons are following –
- Higher Education
- Medical Emergency
- Death of Account Holder
This is a big relief for account holders. Because higher education and medical emergency are the two important reasons a person go for the loan, so in any way it’s far better than to take the loan.
What are the terms and conditions to close the PPF Account before Maturity?
There are certain conditions set by the Government to close the Account pre-maturely
- Your account should be at least 5 years old
First thing account holder is not allowed to close the account any time he/she wants. In order to close it before maturity period you must complete at least five financial years. Suppose you open your account in April 2018 you cannot close it before April 2024. But in case if you open your account before April 2018 you can close it after 1st April 2023.
- Reduction in Rate of Interest
There is a penalty in terms of reduction in rate of interest. When you close your account before maturity the government gives you 1% less interest.
Suppose when you have opened the account in May 2012 and that time interest rates have been for the coming financial years like 8.5%, 8.6%, 8.7%, 8.6% and 8.8%. And when you close your account in 2017 than your interest will be calculated 1% lower than what it is. So you will receive the amount on following rate of interest: 7.5%, 7.6%, 7.7%, 7.6% and 7.8% for five financial years from May 2012 to April 2017.
Is there any guideline for pre-mature closing of account due to medical emergency?
You are allowed to close your account before maturity date after completion of five financial years I case of medical emergency.
You can withdraw your PPF amount in case there is a life threatening diseases to the account holder or your spouse or dependent children or parents. For this you need supporting documents from medical authority.
Diseases are not yet specified by the Government.
What are rules of Pre-mature closure for Higher Education?
For higher education of your own, in case you are married, so for your children too you can close your account before maturity date but after completion of Five years.
In case of higher education too you need to provide supporting documents, fee bill as a proof of confirmation of your admission in well recognized institute, I India and Abroad both.
What is the procedure of taking loan from PPF account?
Being a PPF account holder you are eligible to take a loan from your fund. But for this you have to complete three financial years. And after completion of third financial year you can take the loan but there is one more condition that you can take the loan only till the end of sixth financial year.
Suppose you have started your investing in your PPF account in FY 2011-12, then you can take the loan from FY 2013-14. And you can avail this facility till March 2016-17 (31st March 2017).
What is the maximum amount can be taken as a loan?
Please keep I mind that you cannot take the full amount as a loan. Maximum amount is allowed upto 25% of your fund available at the close of two financial years immediately before the year you have applied to the loan.
For example: if you apply for a loan any date during the FY 2017-18 then you can take the loan 25% of the amount available as o 31st March 2016, including the interest amount credited to your account.
What is the interest rate charged on the loan taken on PPF?
The interest rate will be 2% higher than what is prevailing at that time.
You must know one thing, government announces interest rate every quarter, and rate of interest varies. But once you take the loan then the interest rate will be fixed till the time you repay it.
Here is one condition you should know that, you won’t be able to take another loan until you repay the existing loan.
You are supposed to repay your entire loan within the period of 36 months. And this duration is start from the first day of the next month in which your loan has been sanctioned. Suppose your loan is sanctioned in August so the tenure will start from 1st October.
What, if the loan has not repaid within 36 months?
In case the loan is not repaid within the duration of 36 months the interest rate will be higher by 4% and this rate will be applicable from the date your loan has been sanctioned till the time you repay it.
You can repay your loan either in lump-sum amount or you can pay it in two or more monthly installments.
In case you repay the whole principal amount then you are not allowed to pay the remaining interest rate I just two monthly installments not more than that.
To Read more information on PPF click at FAQs on PPF Account – Part 1