After the change in PPF rules, there is some confusion among the people regarding the calculation of penalty for premature closure during the extended period. Let us tell you what benefits investors will get after the new rules.
Some time ago, the government has made some changes regarding premature closure of Public Provident Fund i.e. PPF accounts. This scheme is being called Public Provident Fund (Amendment) Scheme, 2023. After these changes made in the rules, there is confusion among some people regarding the calculation of penalty during the extended period. Let us tell you in very simple language what effect the changes in the rules will have on you.
This is the old rule
According to the old rule, if a person does premature closure of the account during the extended period, then he will have to pay the penalty from the time the PPF account is extended. Meaning, if a person’s account is extended for 5 years after the maturity of 15 years, then 1 percent penalty will be imposed from the beginning of the extended period. At the same time, if someone has extended the account more than once in a block of 5 years, then the penalty will be imposed only when the PPF account was extended for the first time after maturity.
Relief from new rules
Investors have got relief after the new rules of PPF came into existence. Now if the PPF account is in extended period, then in case of premature closure, 1 percent penalty will be calculated from the beginning of every 5 year block. In such a situation, if you extend the account several times in a block of 5 years, then you will not have to pay the penalty from the time of extension for the first time, but it will be calculated only from the same 5 year block in which the investor has done premature closure. Has applied for.
Under what circumstances can premature closure be done?
According to the current rules of PPF, the account cannot be closed for the next 5 years of the financial year in which the account is opened. After this, the account can be closed only under certain special circumstances, but a penalty is imposed on reduction in interest.
- If there is a medical emergency and you need money for the treatment of yourself or a family member, you can make a partial withdrawal or even get premature closure.
- For children’s higher education, premature closure of PPF can be done or partial withdrawal can be done.
- Even if you are shifting abroad, you can close your PPF account and withdraw the entire money.
- In case of death of the account holder, the account can be closed before maturity. In this situation the 5 year rule does not apply.
How to get premature closure done?
To close the PPF account pre-maturely, you have to submit a written application to the home branch of the bank account. In this application you have to tell the reason why you are closing the account. Meanwhile, you also have to attach some documents along with the application. It should contain a copy of the PPF passbook.
Also, if you are closing the account for treatment of illness, then documents given by the medical authority, if you are closing the account for higher education, then fee receipts, book bills and documents confirming admission and death cases. Death certificate has to be attached. After verification of documents, the application for closing the account is accepted. After this your account is closed but the penalty amount is deducted.
