New Delhi | Jagran Business Desk: Introduced in India in the year 1968, Public Provident Fund or PPF's objective is to mobilize small savings in the form of investment along with a return on it. A savings-cum-tax savings-investment means, PPF enables a person to build a retirement corpus while saving on annual taxes.

The current interest rate on PPF is 7.1 percent per annum which is compounded annually. The Ministry of Finance sets the interest rate every year, which is paid on March 31. The interest is calculated on the lowest balance between the close of the fifth day and the last day of every month.

Furthermore, as a rule, an individual can fully withdraw the PPF account balance upon maturity, i.e. after completion of 15 years. The entire amount standing along with the accrued interest can be withdrawn freely.

However, if account holders need funds, partial withdrawals can be made from the 6th financial year after the account is opened. In addition, the invested amount can be withdrawn prematurely after at least five years if certain terms and conditions are met.

Here's when can you withdraw PF?

Withdrawal on maturity

PPF accounts have a maturity period of 15 years. At the time of withdrawal, Form C is filled and submitted to the bank or post office where the PPF account was opened. After this, the PPF account is closed and the invested amount with returns is a credit to the bank account.

Partial withdrawal

An account holder can withdraw prematurely, up to a maximum of 50% of the amount that is in the account at the end of the 4th year (preceding the year in which the amount is withdrawn or at the end of the preceding year, whichever is lower). Further, withdrawals can be made only once in a financial year. On partial withdrawals of the PPF account, no tax is levied. For this also, Form C is submitted at the bank or post office wherever the PPF account is opened.

Premature closure

Premature closure of the PPF account is allowed only 5 financial years after the account is opened. It is only allowed on three grounds: life-threatening ailment or serious diseases faced by account holder/spouse/children, children’s or account holder’s higher education, change in resident status of account holder (becoming an NRI). Furthermore, a penalty is levied in the form of a 1% reduction in the interest applicable for the period for which the account is held.

Posted By: Sugandha Jha