If you invest in a Public Provident Fund (PPF), this information is essential. Most people are aware that the government-run small savings scheme has a 15-year investment period. Investments made in PPF mature after this tenure. However, you can continue investing even after 15 years. PPF remains the safest, tax-free, and guaranteed return small savings scheme, and therefore, if you don’t need the money immediately, you can remain invested and avail the benefits of long-term investment. Here’s all you need to know about the PPF extension rule.
Maturity period of PPF
- The lock-in and maturity periods for the PPF account are 15 years.
- In every financial year, you can deposit a minimum of Rs 500 and a maximum of Rs 1.5 lakh in it.
- The interest rate is reviewed quarterly and is currently 7.1 per cent per annum.
What is the option after the maturity period?
Upon completion of 15 years, PPF account holders have three options. The first option is to withdraw the entire amount and close the account. The second is to extend the account after 15 years, in 5-year blocks. This allows you to earn interest only on the old balance without making any additional deposits. This extension without a deposit means your old balance continues to earn interest even without any fresh deposit. However, the extension is not automatic. You must apply to the bank/post office by filling out Form 4 (or Form H) within one year of maturity.
The third option is to extend the tenure by depositing a new amount. You can deposit up to Rs 1.5 lakh per year. This amount also earns 7.1 per cent interest and the benefit of compounding.
How many times can the time period of PPF be extended?
You can extend your PPF term an unlimited number of times. However, this extension is done in blocks of five years. This means you can extend it for 20, 25, or 30 years, or as long as you wish. There is no upper limit.
Tax Benefits (EEE Status)
The money you deposit in a PPF account is tax-free under Section 80C. Also, the interest earned on PPF is tax-free. Furthermore, there is no tax on maturity or withdrawal. This benefit remains even during the extension period.
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