A Public Provident Fund (PPF) is a long-term small savings tool popular among various age groups because of its guaranteed returns, tax benefits, fair interest rates, sizable lump sum on maturity, ease of account opening at post offices and banks, etc. A PPF contributor can also avail of a loan facility against the accumulated funds, make partial withdrawals, and opt for premature account closure in case of a dire need for money.

But the high point is its compounded annual growth on the interest earned. As per the Finance Ministry’s revised notification, the current interest rate on PPF deposits is 7.1 per cent.

Now, let us consider when an individual can withdraw funds from a PPF account.

If there is an immediate need for funds, the subscriber can take a loan against the accrued corpus within five years from the end of the first year of opening the account. However, there is a cap. The loan can be taken up to 25 per cent of the balance in the account at the end of the second year immediately preceding the year when the loan is applied. As such, the loan amount is likely to be low. 

However, after five years, the account holder has two options: a partial fund withdrawal or premature account closure and full withdrawal.

Partial Withdrawal: After five years, the account holder can partially withdraw from the PPF account by applying on Form-2. It excludes the year of the investment made; for example, investments in 2020-21 will be allowed for withdrawal only in 2026-27 or later.

• Partial withdrawal is allowed once in a financial year for weddings, house renovation, education, etc.
• The withdrawal amount cannot be more than 50 per cent of the credit balance at the end of the 4th preceding year or the preceding year, whichever is lower. It is subject to the condition that there is no outstanding loan and interest against the PF account; if there is any outstanding amount, it shall be paid by the account holder before availing the withdrawal facility.

If there is a need for a higher amount, a partial withdrawal, which has a cap of 50 per cent, may not meet your requirement. In such a case, the individual can close the account prematurely, allowed only after five years from the end of the year of account opening.

Premature Closure: Unlike partial withdrawal where no specific reasons stipulated for withdrawal, early closure is allowed only under three conditions.

• The account holder, spouse, or the dependent children has a life-threatening disease.
• The account holder or the dependent children’s higher education expenses.
• If the account holder’s residential status changes to Non-Resident Indian (NRI).

How To Withdraw Money From PPF? 

For partial withdrawal, the individual must submit a duly filled Form-2 to the post office or the bank where the account is being maintained. They must provide the account number, amount, and a signature on the form, along with the necessary documents for submission. Once the withdrawal request is approved, the bank or the post office will directly transfer the amount to the bank account. If there is no savings bank account in the same post office or the bank, they will issue a demand draft (DD) in the account holder’s name.

In case of premature closure, the subscriber must submit a duly filled Form-5 and the necessary documents. After the required details are submitted, such as medical reports confirming the seriousness of the disease, records and bills confirming admission to a recognised educational institute, a copy of the passport, verified income tax returns ITRs, etc., the bank or the post office will close the account and transfer the amount to the account holder’s savings bank account or issue a DD.