PPF Withdrawal & Loan from PPF Account (Rules before 15 years: Updated 2020)

Normally, the Public Provident Fund or PPF account matures at the end of the 15th year. At that point, you can either withdraw the full amount tax-free or extend your PPF account (with or without contribution) further for a block of 5 years.

I have already written in detail about how to extend PPF account after 15 years (with or without contributions) if you wish to remain invested in PPF and continue to earn decent tax-free returns.

But many people in India who are PPF account holders, want to know the answer to questions like:

  • Can I withdraw PPF after 5 years?
  • Can I withdraw money from PPF account before maturity?
  • What is the minimum lock in period for PPF account?

That is, they want to know how can they withdraw money from PPF before maturity in the 15th year.

So in this post, lets specifically discuss PPF Withdrawal Rules applicable before maturity in 15th year. We will also discuss how and when can you take a loan from your PPF account.

PPF Withdrawal Rules before 15 Years (Updated 2020)

The PPF account matures after 15 years. But you are allowed to partially withdraw some money in certain cases subject to latest PPF Withdrawal Rules. If you wish to withdraw money from PPF before maturity, then the following points must be noted:

  • From when can you withdraw from PPF account? You can make partial withdrawals from PPF only from the 7th financial year onwards (from date of PPF account opening) or completion of 5 years from the end of the year in which account was opened. This also means that partial withdrawals are not allowed during the first 6 years.
  • How many withdrawals can you make from PPF account? You are only allowed to make 1 (one) partial withdrawal from your PPF account during a financial year.
  • How much can you withdraw from PPF account? You are only allowed to withdraw the lower of the following two amounts from your PPF – i) 50% of the PPF account balance at the end of the financial year immediately preceding the current year, or ii) 50% of the PPF account balance at the end of the 4th financial year preceding the current year.
  • Is withdrawal from PPF before maturity taxable? The premature partial amount withdrawn from PPF is tax-free. SO if you were worried about the taxability of PPF withdrawal before maturity, then there is nothing to worry as the amount is tax-free.

Let’s take a small example to understand how and when are PPF withdrawals allowed.

Suppose you opened your PPF account in October 2005 (FY 2005-06).

Now as per PPF withdrawal rules, the premature withdrawals can be made after the expiry of five years from the end of the financial year in which the account was opened. So in the above case, you are only allowed to make partial withdrawals from 1st April 2011 onwards.

And what are the restrictions on the amount that can be withdrawn?

As per the rules, the maximum partial withdrawal allowed is lower of the following:

  • 50% of the PPF account balance (four years prior to the year of withdrawal)
  • PPF account balance in the preceding financial year, whichever is lower.

In our example, you can withdraw lower of the following:

  • 50% of the balance in your PPF account as on March 31, 2008, or
  • 50% of the balance in your PPF account as on March 31, 2011

So what’s the procedure for withdrawal from PPF Account?

If you wish to make withdrawals, then a Form C is to be submitted to withdraw a partial amount from the PPF account.

It is available at the bank or post office where the PPF account is. The Form C for PPF withdrawal is also available online. Once you submit the form, the bank or post office will verify the date of account opening and check the eligibility for withdrawal as per rules discussed earlier in this post. If found eligible, required amount (with the limits as specified by PPF withdrawal rules) will be credited to the PPF subscriber’s bank account or a Demand Draft will be issued.

So that was all about the PPF Withdrawal Rules 2020 or more specifically, you can say, the Rules for partial withdrawal from PPF Account (Updated 2020).

But what if you require money during the first 6-7 years of PPF account opening?

At this juncture let me remind you that PPF is a long-term savings product where it is expected that you do no withdraw from it. That is how the product is designed. But there can be situations where you really do need the money back from the PPF (as you have no other savings or can’t take help from anyone else). For that, rules of partial withdrawal are discussed above. But withdrawals are allowed only after 7 years of PPF.

If you need some money before that, then you can consider taking a loan from PPF.

Let’s see what are the latest rules for taking Loan from PPF Account.

Loan from PPF Account Balance (Updated 2020)

Since you cannot partially withdraw from your PPF account before the seventh year, you can take a loan against it between the 3rd year and the 6th year.

Let’s say you open your PPF account in September 2019. This means you opened the account in FY 2019-20. Now you shall be eligible for the PPF loan facility from April 2021. And you can only use this loan facility till March 2025.

And how much loan can you take from PPF?

The PPF loan amount is capped at 25% of the PPF balance at the end of two preceding years.

So for the PPF account opened in September 2019, following is the loan amount that you can take:

  • From April 2021 to March 2022, you can take loan up to 25% of PPF balance as on 31st March 2020.
  • From April 2022 to March 2023, you can take loan up to 25% of PPF balance as on 31st March 2021.
  • And so on.

And as mentioned earlier, you can only take PPF loans for this account example till March 2025. After that, i.e. from April 2025, you are allowed to make partial withdrawals from your PPF account and so, no further loans are given to PPF account holder.

Being a loan, you have to pay a PPF Loan Interest which is 1% (before 2020, it was 2%) more than the prevailing interest rate of PPF (historical PPF interest rates). So if PPF interest rates are 8.5%, then you get PPF loan interest rate 9.5%.

The PPF loan has to be cleared within 36 months (or 3 years).

Unless and until the first PPF loan is cleared, you cannot take a fresh loan.

The PPF Loan isn’t repaid like other personal loans and home loans where both loan principal and interest is serviced via EMI together. In PPF Loan, the principal is repaid first. The interest is to be paid after that (but within the maximum loan repayment period of 36 months). In case it isn’t, the interest is deducted from your PPF account balance.

Suggested Reading: PPF Maturity Options after 15 Years & Rules (Updated) where we talk about what option do PPF account holders have after maturity in 15th year.

As you might have realized by now, the rules and procedures for withdrawal from your PPF amount before 15 years are fairly strict. And rightly so. PPF is a great instrument to accumulate substantial corpus in a risk-free manner (read how to save Rs 1 crore in PPF or use this PPF Calculator to know how much you can save using PPF) And if you withdraw from it, then you are disturbing the compounding of money in between which can reduce the final PPF corpus. So you should think very carefully (and explore all other options) before you decide to try and withdraw money from your PPF account.

I hope you found this discussion on PPF Withdrawal Rules 2020 and PPF Account Loan Rules 2020 useful.

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