The Indian government offers a long-term savings plan called a Public Provident Fund (PPF) account through authorized banks and post offices. It is a popular choice for individuals to make investments due to its security and tax advantages.
However, one of the most important rules to keep in mind when investing in a PPF account is that it cannot be closed before it reaches maturity and has a 15-year maturity period.
If the PPF account is closed before it reaches maturity, a penalty must be paid. The cost of closing the PPF account before it matures is the loss of interest for the remaining time. In other words, the investor will receive the deposit’s principal and any interest earned up to that point, but the account will not earn any more interest for the remainder of its term.
In addition, if a PPF account is closed early, interest earned up to the five-year mark is subject to taxation. because a PPF account can only earn interest without paying taxes if it has been open for five years or more.
However, there are a few situations in which this is not the case. If a person becomes disabled and is unable to contribute any more, for instance, they may be allowed to close the PPF account before it matures. In a similar manner, the account could be closed by the legal heir or nominee of the deceased.
Additionally, it is essential to keep in mind that withdrawals from the account are only permitted after a period of seven years have passed and are restricted to 50% of the balance that was available in the fourth fiscal year immediately preceding the year of withdrawal.
