Many readers often ask us variations of, “My PPF account is maturing; should I extend it or open a new one?” We discuss how to handle PPF accounts that are about to mature. When and how to extend them and when not to.
A PPF matures after 15 financial years from the FY of opening. For example, an account opened in FY 2000-01 (or before 31st March 2001) will mature on 1st April 2016. There are three options available to a subscriber after maturity. (1) Close the account and be done with it! (2) Keep the account open without further contributions. (3) Extend the account for five years with further contributions.
If we have been saving for a particular goal, option 1 is the right choice. Even here, an extension is a consideration. For example, say we run a PPF account as guardian for our child. This is meant for her college education. However, as the admission process draws near, if we can manage the funds from other sources (without dipping into the retirement corpus), we can consider converting the minor account to a major account and extending it.
In this case, the child will start her career with a PPF account with a lock-in of only five years, which can be extended indefinitely (in theory, at least! Practically, there may be some roadblocks from officials unaware of the rules). It will also have much better liquidity than starting a new account (see below).
On the other hand, liquidating the minor PPF account and starting a new one for the child after she turns 18 with her money is also perfectly fine. There is no “loss” here as the money can be used to partially/fully fund college, and the rest can be routed to the retirement corpus.
If we choose option (2), the corpus will continue to earn interest! We can make one withdrawal each financial year for any amount. While this is a good option, it is of little practical use. If we withdraw without contributions, the corpus will soon drop to zero.
If the money is not required immediately (option 1 ) or in stages (option 2), extending a PPF account is a better choice. However, such an extension should be made within one financial year of maturity. The extension will require one or more physical visits to the branch. If contributions are made without extending the account, they will not earn any interest and are not eligible for 80C deductions. Once the extension is made, it cannot be revoked.
Withdrawal rule after extension: The subscriber can only withdraw 60% of the account balance at the start of the extension, either in one-shot or spread over the five years. Aside from the contributions, this is the key difference between options (2) and (3).
I was recently informed on Twitter that some banks do not approve of repeated PPF extensions and prefer that a fresh account be opened. The PPF rule book states that unlimited five-year block extensions can be made.
A subscriber may at his option (to be exercised before the expiry of the
first year of every extended block period) avail of this facility for a further block
of 5 years on expiry of 20 years or on expiry of 25 years and so on, from the end
of the year in which the initial subscription was made.
Also, we can exercise the option (2) after exercising the option (3) for any number of block periods.
If the account is continued with deposits for one or more block period of
5 years, the subscriber can leave the account without deposits on
completion of any block period. The account will continue to earn interest
till it is closed and the subscriber can make one withdrawal every year
form the account.
If you do not need the money to spend for the next five financial years, then extending the PPF account would be wise. If your asset allocation (for a goal that is far away – say 15+ years away) is debt-heavy, you can correct it in two ways after extension: (A) gradually withdraw from PPF to equity. (B) Temporarily and suitably reduce the investment to PPF.
Extending a matured PPF reduces the lock-in period and improves liquidity without impacting the tax-free status of the already accumulated corpus. It is a natural choice but must be done after appreciating personal circumstances, rules and limitations. When dealing with banks, it is best to assume they are unaware of the rules and keep the rule book handy.
Do share this article with your friends using the buttons below.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Podcast: Let’s Get RICH With PATTU! Every single Indian CAN grow their wealth!
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
🔥Now Watch Let’s Get Rich With Pattu தமிழில் (in Tamil)! 🔥
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit ‘reply’ to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.
Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)
