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How to close a PPF account prematurely?

May 09, 2018 | 2 years ago | Read Time: 2 minutes | By iKnowledge Team

Earlier, you were not allowed to close your Public Provident Fund (PPF) account before its maturity. But now, the finance ministry has made changes in the rules that allow you to prematurely close your PPF account, under certain restrictions and conditions. The conditions that allow you to close the PPF account are:

When Can You Close It?

You can only close your PPF account prematurely if you have held the account for at least five full financial years. So, before you save money in a PPF account, keep the five years cap in mind.

This can be done for two reasons only.

  1. To pay for medical expenses if you, your spouse, or your dependent children or parents are diagnosed with a chronic illness.
  2. If the account holder wants money to pursue higher education.

Application Process

To close your PPF account all you need to do is submit a written application to the accounts office where the account is held with a mention of the reason. Make sure your reason falls within the two stated criteria.

Documents You Need to Submit

If you only submit an application and state the reason, it won’t be enough. You need to provide proof that your problem is legitimate. To prematurely close your PPF account, you need to submit the following documents:

  • Your PPF passbook
  • Letter from a recognised medical institution stating the nature of the illness and the medical treatment required or admission acceptance letter, fee receipt etc.

Charges You Need to Keep In Mind

A charge is applicable when you close your PPF account before the maturity period. This is to discourage people from impulsively closing their accounts. When you prematurely close your PPF account you must pay a penal charge, which is one percent less than the interest rate applicable on the opening date of the account.

Choose A Child Education Plan Instead

A child education plan can provide you with the funds you require for higher studies. This prevents you from touching your savings and also gives you a longer payback option.

A PPF might block your money for a long time, but you’ll be thankful for the scheme in your retirement days. Hence, look at premature PPF closure as your last resort. Invest in Aegon Life’s iMaximize plan to secure your child’s dreams even after you.

Things To Remember Before Closing

Before premature closure was permitted for a PPF account, you could make a partial withdrawal from your account after seven years. This provision stays put.

You cannot prematurely close your PPF to pay for the higher education of your spouse or dependent children. The account holder must be seeking to pursue higher education to be able to close their account prematurely.

If the account holder is a minor, the guardian can undertake closure activities on his/her behalf.

Closing a PPF account ahead of time is a simple process and doesn’t cost much. With new guidelines, a PPF account can be closed prematurely in case of an emergency. But, if possible, take steps to avoid it, like having an emergency fund for any mishap that may take place.

You can get tax breaks if you have a life insurance policy as well, provided you have add-ons like medical insurance and critical illness riders.

Advt no.: IA/May 2018/3916


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