PPF Withdrawal Rules – Loan, Partial Withdrawal, Premature Closure - YouTube

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Namashkar, my name is Mukul and welcome to Asset Yogi

Friends we did a video in past in which we discussed Public Provident Fund (PPF)

How the account is opened, what are its features and what is its maturity period

If you haven't watched that video yet, then I would request you to watch that first

So that you get to know about the details of the PPF account

In that video, we discussed that the maturity period of PPF account is minimum 15 years

After that, you can extend it for 5-5 years

But if you face any emergency and you require money in between the completion of 15 years

Let's say you need money in the 5th, 6th, or 7th year

What all options do you have in such cases?

So you get 3 options here

1. You can borrow a loan against the PPF account

2. You get a partial withdrawal facility

3. You can close it in a premature state

All 3 options have different rules

And we're going to talk about all those rules in this video, so stay tuned!

So friends the first option is Loan

If we talk about loan, let's say you invested on 3rd July 2019 in the PPF account

That is your financial year 1

After that, we'll see that when you can get a loan after that

So it has a simple rule

Loan from 3rd to 6th financial years from account opening

What does it mean?

If you invested on 3rd July 2019, which will be the 1st financial year?

It will be 2019-20

2nd will be 2020-21 and the 3rd will be 2021-22

That means from the starting of the 3rd financial year, i.e 1st April 2021

To the end of the 6th financial year

Which is the 6th financial year? 2024-25

So what is its end?

Till 31st March 2025, you can take a loan and you are eligible for it

So in short, starting from the 3rd financial year to the end of the 6th financial year, you can borrow a loan

Another question arises what is the interest rate?

So whatever interest rate you are getting on PPF, add 2 more per cent and that will be the interest on the loan

Let's say if the interest rate of the PPF is 8%

Then add 2%, i.e you have to pay 10% interest on the loan

3rd is about your repayment period

Whenever you'll borrow loan, you have to repay it within 36 months

Either you can pay in instalments or one time

But you have to pay within 36 months

Apart from this, if you cannot repay in 36 months

Then your interest becomes PPF interest + 6%

So you have to pay 6% extra on the default period

So it is a 4% penalty

Now the 4th question arises how much loan amount can we get?

It has a very simple answer

In whichever year you want to borrow a loan, let's say in October 2021

Then you can get a loan equal to 25% of the balance at the end of the last 2 financial years

So which are the last 2 financial years?

The first is 2020-21and 2nd is 2019-20

At the end of 2019-20, the PPF amount was Rs 1 lakh

The text in blue is the example of PPF amount

And interest is included in these

So to make calculations easy, I took these amounts at the end of each financial year

So if the amount at the end of 2019-20 is Rs 1 lakh

Then 25% of Rs 1 lakh, i.e you can borrow a loan of Rs 25,000

Let's take another example

Let's say you want to borrow a loan in January 2025

So the last 2 financial years before this will be 2023-24 and 2022-23

At the end of 2022-23, the total amount is Rs 4 lakhs

So 25% of 4 lakhs is Rs 1 lakhs. So you'll get this much loan

So these are the rules related to loan

Now let's talk about partial withdrawal

So when can we do partial withdrawal?

We can do partial withdrawal from the 7th financial year onwards

Let's understand through examples

You invested on 3rd July 2019 so the first financial year is 2019-20

and 2025-26 is your 7th financial year

So you can do partial withdrawal from its starting

So as we saw in our previous example, you got a loan till 6th financial year

You got a loan in this portion

After this, you will not get loan but you'll get a partial withdrawal facility

So you'll get a partial withdrawal facility from 1st April 2025

And we saw that you got a loan facility till 31 March 2025

So we understood the timeline but now the question arises how much amount can we withdraw in partial withdrawal

50% of PPF amount at the end of preceding financial year or 50% of PPF amount at the end of 4th preceding financial year

Whichever is lower, you can withdraw that much amount

Let's understand this by an example

Let's say you want to do partial withdrawal in the 8th financial year, i.e in 2026-27

Let's say you want to withdraw some amount in October 2026

So how much you will be able to withdraw

50% of the preceding financial year. So which is the preceding financial year?

One year before 2026-27. That is 2025-26

So whatever your amount is on 31st March 2026, i.e Rs. 7 lakhs

50% of it. So 50% of Rs 7 lakhs

Or 50% of preceding 4th financial year. SO which one is the preceding 4th?

Lets count 1,2,3,4.

How much is the amount at the end of 2022-23?

Rs 4 lakhs. So we'll write 50% of Rs 4 lakhs

Which is the lesser among both? Obviously Rs 4 lakhs

So 50% of 4 lakhs, i.e you can do up to Rs 2 lakhs of partial withdrawal if you want to withdraw in October 2026

So after partial withdrawal facility, the third point is Premature Closure

If you want then you can close your account before the completion of 15 years but there are some conditions

1st condition is, you should have completed a minimum of 5 financial years

Let's understand 5 complete financial years

When you invested on 3rd July 2019, so this financial year will not be counted

Because it is not a complete financial year

The point to note is the complete financial year

So because this one will not be counted, you have to count 5 full financial years from here

So 1,2,3,4,5

So when your 5 financial years will be completed, that means

Till 31 March 2025

After this, you can do the premature closure

That means if you want to close the account in between, then you can

If you close a premature account, you are charged a 1% penalty on interest

If the average PPF interest is 8% over the period of time

Then 8-1 = 7% will be the average PPF interest rate

So keep this in mind

The 3rd condition is that you get the option of premature closure in only 2 conditions

1. In case of any serious illness to the account holder or

2. To the dependent family members like spouse, children, or parents

Another condition is, higher education of account holder

You can close the account if you want to seek higher education

Or if you operate an account of any minor

So if the minor wants to go for higher education then you can close that account and send for higher education

But you cannot close your account to do this

So these are the 3 ways

If you want to withdraw money from your PPF account before maturity, then you can use these 3 methods

1. Loan, 2. Partial Withdrawal, and 3. Premature Closure

Besides this, if you want to know more details about PPF account then you can watch my other video

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Till then keep learning, keep earning, and stay happy as always.