Important rules regarding PPF: One should know

 A very good product for tax planning as well as retirement planning is the Public Provident Fund (PPF) account. Since this is supposed to be your savings income, before retirement, it is not recommended to be withdrawn. PPF rules, however, have certain provisions for you to use this cash before its maturity. Let us see how you can do this.

Loan toward equilibrium in PPF account

Only after your PPF account has completed one full financial year from the end of the year of its opening can you make use of the loan facility. Let us use an example to understand this. So you will only be able to take advantage of the loan from the financial year beginning April 1, 2018 if you have opened your PPF accounts at any time between April 1, 2016 and March 31, 2017. At the end of the financial year, the amount of loan you will take against the PPF account is limited to 25% of the accumulated balance previous to the year in which you made your loan application. So, as of March 31, 2017, you will be eligible to use loans for up to 25 percent of the accrued balance during the current financial year 2018-2019.

Loans from the PPF account may be taken from the end of the account opening year until the completion of the fifth complete financial year. You need to pay an annual interest of 2 percent on the amount of the loan. In 36 months, the loan must be repaid if you do not have to pay penal annual interest at 6% instead of 2% on the balance of the loan that remains unpaid. First, the loan and then the principal to be repaid. The interest left unpaid is debited into the subscriber's PPF account.

Facility to withdraw

The loan facility will cease to be available after five years, but you can withdraw from the PPF account without any requirement to repay it. The amount that can be withdrawn shall, at the end of the immediate preceding financial year or the fourth financial year preceding the year of withdrawal, be limited to an amount greater than 50% of the accumulated balance in the account. If any loan is unpaid, the withdrawal amount is deducted from the amount.

You can only make withdrawals if daily payments are made over all the years in the account. No withdrawals may be made in the event of an irregular account before the account is regularised by the payment of unpaid instalments.

Withdrawals after maturity

If you wish to make deposits in the PPF account by submitting Form H, the term of a PPF account can be extended for a further block of five years at a time for any number of blocks. From the PPF account so extended, you can also make withdrawals of up to 60% of the accrued balance in one or more instalments for a period of five years at the time of such extension. During one financial year, no more than one withdrawal can be made. If the account is extended again, you will withdraw up to 60 percent of the balance for the next five years at the time of such a further extension.

You may withdraw the entire accrued balance at the end of 15 years in one or more annual instalments for the matured PPF account for which the application for further extension has not been made. From time to time, you can continue to gain interest on such balances until the entire balance is removed.

Premature PPF account closure facility

Subject to a few exceptions, the PPF account cannot be terminated before 15 years of completion. Only in two conditions will you close your PPF account or that of your minor child after five years of completion. Firstly, if the amount is necessary for medical care for a serious and life-threatening illness of either the subscriber himself or his girlfriend, his dependent children or parents, premature closure is permitted. The other case where you can close it early is when funds are needed to support the account holder's higher education if a minor is a major. There is a charge for the premature closing of the PPF account. A penalty is imposed for early termination in the form of a reversal of the interest credited for each of the years by 1% for each of the years.