When you opt for an extension, you have the option to either continue with your contribution or without it. For the extension of the PPF account, you will need to inform your bank or post office
NEW DELHI: A Public Provident Fund (PPF) matures in 15 years. But it’s not mandatory for the depositor to close the account. You can extend it indefinitely in blocks of five years.
One option for the account holder is to withdraw the entire amount, including interest, and close the account on maturity. But if you want to make the best use of the PPF, it’s best to extend it until you retire. The longer you stay, the better returns you will get, thanks to compounding.
Here’s an example to show how compounding works. Suppose you keep investing ₹1 lakh every year in PPF. The average interest rate is 7.5% for 15 years. You would end up with about ₹31 lakh on maturity. To double this money at the same interest rate, it will take a little less than 10 years.
When you opt for an extension, you have the option to either continue with your contribution or without it. For the extension of the PPF account, you will need to inform your bank or post office.
If you don’t do it within a year, you cannot make fresh contributions. The balance will continue to earn interest until you withdraw. You can make partial withdrawal once a financial year.
If you decide to continue with your contributions, you will need to fill up Form H. Submitting the form is mandatory. Else, your account will be treated as irregular, and no interest will be paid on fresh contributions. You will also not get the tax deduction benefit under Section 80C.
In case the account holder decides to continue with fresh contributions, then he can withdraw up to 60% of the account balance at the beginning of each extended period – block of five years.