PPF Account: Should You Close Or Extend Public Provident Fund Account After Maturity?

Although PPF accounts have a 15-year maturity date, investors can extend their accounts in five-year increments indefinitely.

New Delhi: The Public Provident Fund (PPF) scheme is a long-term investment option that offers an attractive rate of interest and returns on the amount invested. Moreover, PPF interest and refunds are exempt from income tax. However, it must be noted that a PPF account’s balance cannot be fully withdrawn prior to the 15-year investment lock-in period. Additionally, the PPF is a 100 per cent risk-free modest savings scheme guaranteed by the Government of India.

A PPF account falls under the ‘EEE’ category since it enables investors to claim income tax exemption on deposits up to 1.50 lakh in a single financial year, and PPF interest earned on deposits is fully exempt from any income tax, according to a report in the Mint. Moreover, the PPF interest rate is set at 7.10% by the government for the quarter from April to June 2023.

PPF Account: Maturity Date

Although PPF accounts have a 15-year maturity date, investors can extend their accounts in five-year increments indefinitely. The most significant benefit of extending a PPF account post-maturity is that, should a financial emergency arise before the five-year extension is complete, one will be able to take 60% of the PPF maturity amount.

PPF Account: 3 Options Available When Your PPF Account Matures

There are three options available when your PPF account matures –

1. PPF balance withdrawal
2. PPF account extension without investment
3. PPF account extension with investment option

So, there arises the question of whether one should continue the PPF account after maturity or shut it down. Here is what the experts are saying on this:

PPF Account After Maturity: To Extend Or Close?

Experts say there is no harm in continuing to invest in PPF after maturity as it is 100 per cent risk-free. “PPF account holders are allowed to extend one’s account in five-year blocks for an infinite number of times after 15 years of maturity. However, for that, they need to submit Form H at their bank or post office where they have opened their PPF account. But an extension offer can be exercised when there is no need for a large amount,”  Pankaj Mathpal, MD & CEO at Optima Money Managers, was quoted as saying in the report.

“As PPF is tax-exempt, PPF withdrawal should be the last option, and one should try to continue investing in PPF as it helps an investor beat bank fixed deposit (FD) returns with ease and is 100 percent risk-free,” Mathpal said.

One more SEBI-registered expert advised that PPF account holders should keep on extending their PPF account period after maturity as it gives them higher returns than bank fixed deposits and other less risky investments.

About Public Provident Fund

The PPF, which was established to encourage small contributions for use in investments and returns, was first launched in India in 1968. It is also known as an investment plan that minimises yearly taxes while enabling the buildup of retirement funds.

A PPF scheme is the best choice for people who don’t prefer to take on a lot of risk. Given that the government has enacted this plan into law, it is backed by guaranteed returns to satisfy the minimum standards for financial stability.

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