PPF Partial Withdrawals: How much, When can one do PPF Partial Withdrawal, How, Calculator

PPF scores high on safety, is suitable for all investors backed with tax benefits but is long-term investment option. PPF has a maturity period of 16 years. What if one requires some money that we have deposited in the PPF account? Are there workaround around liquidity problem in PPF? Yes PPF is not that illiquid. If the need, You can take Loan against PPF  is within the first 6 years of opening the account or withdrawing the money partially if the need is after the 6^th year till maturity. This article talks about PPF Partial Withdrawals and briefly covers Loan from PPF.

PPF is not illiquid

The Public Provident Fund (PPF) Scheme, is a tax-free savings scheme.  Long-tenures, compounded, tax-free returns and capital protection make this an ideal option for building a retirement corpus.  Our article Understanding Public Provident Fund, PPF discusses it in detail. Some of the benefits of PPF are:

• Being government-backed, there is a low risk of default. 
• Deposits made towards PPF accounts can be claimed as tax deductions. 
• With interest rates compounded annually, effective returns tend to be more attractive compared to  bank FDs. 
• Interest earned on deposits in the PPF account is not taxable.  This makes the PPF Scheme one of the most tax-efficient instruments in India.

But The Public Provident Fund (PPF) Scheme has very strict rules for when an amount can be withdrawn from the account. The PPF account can only be fully withdrawn from on maturity (15 years) from the date of creation. So does it mean that when one opens a PPF account, all his money is tied up. Answer is No. 

• You can take Loan against PPF  is within the first 6 years of opening the account
• You can withdraw the money partially if the need is after the 6^th year till maturity.
• Close PPF account before maturity : From 1 Apr 2016 you can close your Public Provident Fund account under certain circumstances, provided the account has completed five years. Our article How to Close PPF account Before Maturity discusses it in detail.

One needs to submit Form 2 offline to the bank to apply for a loan or partial withdrawal from PPF.

Loan From PPF between 3-6 financial years

You can avail loan from PPF between the third and sixth financial year of opening the account. For example, if the account was opened in the 2011-12,you  can take a loan between 2014-15 and 2017-18. However, you cannot loan from PPF from the seventh year of opening the PPF account, as it qualifies for partial withdrawal.

• Interest is charged at 2 per cent more than a subscriber receives on the PPF.
• The amount is restricted to 25 per cent of the balance at the end of the second year preceding the year in which the loan is applied for. For example, if the loan was applied in 2015-16, 25 per cent of the account balance at the end of 2013-14 can be taken as loan. The balance amount in the PPF account accumulates interest.

Repayment of Loan from PPF

• The loan (principal) is repayable either in lump sum or in installments within 36 months.
• The interest portion of the loan has to be repaid by two monthly installments after the principal is paid off.
• If the loan is not repaid within 36 months, interest at 6 per cent more than what subscribers receive on their deposits is charged.
•  The interest on outstanding loan which has not been paid before 36 months or paid partly will be debited from the subscriber’s account at the end of each financial year.
• A second loan can be taken on full payment of first loan.

PPF Partial Withdrawals

The Public Provident Fund (PPF) can only be fully withdrawn from on maturity from the date of creation. But if you have a financial emergency, You can opt for partial withdrawal from PPF in order to meet emergency expenses. You can do a partial withdrawal from PPF if you have completed 6 years in the PPF. The partial withdrawal from PPF are subject to certain rules. 

PPF accounts follow the Financial Year cycle. Financial year(FY) begins every 1^st April and ends on 31^st March of the next year. So 31 May 2016 is in FY 2016-17. If you have extended your PPF account, completed the maturity period of 15 years and have extended it by 5 years with or without a subscription. Our article On Maturity of PPF account discusses it in detail.

We will discuss Partial Withdrawal from PPF as follows:

• Partial withdrawal from PPF when PPF account has not been extended.,i.e within 15 years of opening PPF account.
• Partial withdrawal from PPF when PPF account has been extended with a subscription.
• Partial withdrawal from PPF when PPF account has been extended without a subscription.

Benefits of PPF Partial Withdrawals

• No penalty: Unlike premature closure of PPF account, partial withdrawals do not attract any penalty and thus the amount can be used without any agony.
• No need to take Loans: As your financial needs will be catered by the partial withdrawal of PPF you will save your interest that you might have ended up paying if you would have taken a loan.
• It’s partial withdrawal: Balance amount continues to earn interest.  This way one can withdraw the partial amount from PPF and let it grow too.

PPF Partial withdrawals

When can you do PPF partial withdrawals?

You can do a partial withdrawal from PPF if you have completed 6 years in the PPF i.e from the 7^th financial year. For example, if Mr Deshpande has opened a PPF account in January 2016(FY 2015-2016), he will only be able to withdraw partially from his account from the 1^st of April 2021. The number of financial years, counted from when he opened the account will be as follows:

• Year 1: April 2015 – March 2016
• Year 2: April 2016 – March 2017.
• Year 3: April 2017 – March 2018.
• Year 4: April 2018 – March 2019.
• Year 5: April 2019 – March 2020.
• Year 6: April 2020 – March 2021.
• Year 7: April 2021 (Mr Deshpande can begin withdrawing from his PPF account from this date).

How many times can one do a partial withdrawal from PPF?

Only one partial withdrawal will be allowed every financial year.  In case, the withdrawal is from minor’s Account, the guardian has to make a declaration that the money is required for the benefit of the minor.

How much amount can one withdraw from PPF?

The amount of partial withdrawal from PPF  that can be done is lower of:

• 50% of the account balance as at the end of the last year in which request for partial withdrawal is made
• OR
• 50% of the account balance as at the end of the 4^th year, immediately preceding the current year.

For Example: Mr. Munshi opened a PPF account in financial year 2014-2015. Following image shows the details of his balances, eligibility and amount that can be withdrawn. We have assumed that he has deposited 1 lakh ie 1,00,000 every year. So if Mr Munshi wants to withdraw in FY 2020-21 then

• 50% of the account balance as at the end of the last year in which request for partial withdrawal is made. His closing balance one year before was Rs 7,95,902 and 50% of which is 3,97,951.
• 50% of the account balance as at the end of the 4^th year, immediately preceding the current year. So in FY 2016-17 Balance  was Rs 3,51,979 and 50% of balance is Rs 1,75,989.5.
• Minimum of  3,97,951 and 1,75,989 is 1,75,989.

Amount for PPF partial withdrawals

PPF Partial Withdrawals after the extension of PPF account without contribution

PPF account after the extension of PPF account without contribution is when you have extended the maturity period by 5 years but you do not contribute any money for the additional period of 5 years after 15 years. Note that once it is considered as “extended without any further contribution”, then later you cannot alter the term contributing money during the extended time frame. So if you extend PPF without contribution You can withdraw money during this additional period but you cannot make any investment.

For Partial Withdrawals in PPF account after an extension of PPF account without contribution, you can withdraw any amount,10%, 50% or 90% from your Public Provident Fund account, there is no limit. The balance amount will keep on earning the interest further. However, you can withdraw only once a financial year. 

PPF Partial Withdrawals Partial Withdrawals after the extension of PPF account with contribution or subscription

You can choose to invest in your PPF account on a regular basis even after extension. It means just like while you were was depositing the money previously, you can continue to do so till the time you wish to by just extending it for the block of 5 years. The balance will continue to earn interest till it is completely withdrawn.

Procedure for PPF Partial Withdrawals

To withdraw the amount from your PPF account in any bank/ post office you have to submit your application along with Form 2, shown below. Form 2 has replaced Form C on 12 Dec 2019 when new PPF rules came out.

• Details such as your PPF account number, amount of withdrawal need to be stated.
• You need to Enclose a copy of your PPF passbook.
• For partial withdrawal of PPF from minor’s Account, the guardian has to make a declaration that the money is required for the benefit of the minor.

PPF New Form 2 for taking loan or withdrawing from PPF

Related Posts:

• Understanding Public Provident Fund, PPF
• Voluntary Provident Fund, Difference between EPF and PPF
• On Maturity of PPF account
• PPF Account for Minor and Self
• How to Deposit in PPF amount
• How to Close PPF account Before Maturity
• How to activate Dormant PPF account?
• Transferring PPF account

Do you have a PPF account? Have you done PPF withdrawals or taken loan from PPF?