Extension of PPF Account Tenure: How and When

Widely used as one of its kind investment instruments for tax saving and long-term growth in terms of returns generated, Public Provident Fund has become a popular choice amongst the salaried individuals. PPF scheme is a long-term investment option offering returns on the invested amount.

All you should know about PPF Account

• A PPF account can be easily opened with a Post office or any public or private bank in the country. A PPF account can be easily opened by filling an application form, online or offline and getting your KYC done
• The interest rate on PPF investments is decided by the Finance Ministry on a quarterly basis. For the first quarter (April-June) of the financial year, 2021-22, the interest rate on PPF has been fixed at 7.1%
• Investments in PPF offer tax deduction under Section 80C of the Income Tax Act
• The minimum amount that can be contributed to a PPF account is Rs.500 while the maximum contribution that can be made in a financial year is Rs.1.5Lakh
• Investments in PPF accounts have a fixed maturity period of 15 years from the end of the financial year in which the account was opened
• Investors have an option of extending their PPF tenure indefinitely for a time period of 5 years at a time upon its maturity
• Investors can also open a PPF account in the name of their minor children. However, it must be noted that the total annual contribution should not exceed Rs.1.5 Lakh and a total of only 12 contributions can be made

You can read the detailed information about investments in PPF account here.

Extension of PPF Account

A PPF account matures after a fixed time period of 15 years. However, upon maturity, the investors have an option of extending their investments for 5 years at a time. In case an investor chooses to extend his/her PPF tenure, he/she can do it in either of the two ways- 

• Withdrawing the previous balance and making fresh contributions
• Making a contribution to the previous balance

Additionally, it must be noted that investors can still withdraw their balance during the extended period. 

Extension with fresh contributions

To make fresh contributions after maturity of the previous PPF investment, the investors must follow the given guidelines-

• You must inform your bank about your choice of extending your PF investment with fresh contributions by submitting Form 4 (earlier known as Form H)
• It must be noted that submission of this form is a mandatory requirement, else your account will be treated as irregular and no interest will be paid on fresh contributions
• Failure in the submission of this form will also restrain you from receiving any tax benefits under Section 80C of the Income Tax Act
• The minimum annual contribution required for a fresh contribution is Rs.500
• While making fresh contributions, you must ensure that Form 4 must be submitted at the time of each extension if fresh contributions are being made
• Investors are allowed to withdraw no more than 60% of their account balance during the extended period

Extension with The Previous Contribution

If you do not wish to make any fresh contributions to your PPF account, you may choose to continue with your current investment and contribute to the same.

• To extend your previous contribution, you do not need to submit any form to your bank
• It must be noted that you are allowed to partially withdraw your account balance only once during the tenure of your extension
• After the completion of 15 years of your PF tenure, you should inform your bank about your choice of continuing with your deposit within 1 year
• After one year, you will either have to withdraw your entire balance or extend your account with fresh contribution

Since investments in PPF offer multiple benefits to the salaried employees, an extension of PPF is never a bad idea. Unless you need the amount or are already retired, you can continue to reap the benefits of taxation under Section 80C of the Income Tax Act and gather a corpus for your retirement. However, the extension of PPF account is still a personal choice and entirely depends upon the investor’s personal financial needs.