Jun 032016

How to Close PPF Account Before Maturity?

Yes, we will get to the answer of the question you see in the title but before that, let us get a quick knowledge about PPF. So, what is PPF? It stands for Public Provident Fund. It has a long history but in short – it is a government scheme which focuses on small savings. What do we mean by small savings? It simply means that you can literally save small amounts of money. You don’t need to make big investments. The minimum amount you need to invest in a year is INR 500.

How to Close PPF Account Before Maturity

Now the next logical question that follows is, what is maximum allowed investment in PPF? PPF allows a maximum of INR 1.5 lakhs in a year. Actually more can be invested but tax exemptions can be enjoyed only up to the capped amount of INR 1.5 lakhs. Any investment above that will be taxed.

One of the primary reasons why PPF is extremely popular is that it is very safe. Being a government scheme, the chances of losing the investment money due to bankruptcy is not possible. Well, in extreme situation of complete economic meltdown (economic depression) loss of money may occur.

There are several other benefits too. For instance, a PPF account cannot be liquidated even by a court mandate. Only and only the government has the right to touch the PPF account. So, suppose you take a loan and you default. The lender will never be able to touch your PPF investments even if it tries to get a court order to liquidate all your investments for recovering the loan.

Another amazing benefit is high interest earning. Well, we won’t say that the interest earnings are best in class but they are definitely pretty handsome. To make things better, the money in the PPF account grows at a compounded rate. This means that whatever interest is earned in a year is added to the account balance and then the total balance starts earning interest in the next fiscal year. Isn’t that cool?

You can also take out loans against your PPF investments after a certain number of years at a very low rate of interest. Partial withdrawals are also allowed but subject to conditions. So basically, a PPF account comes with tremendous flexibility and of course financial security during unexpected financial downswings or also during the silver years after retirement.

How to close PPF account before maturity?

Now that we have a general idea of what a PPF account actually does, we can divert our attention to the actually question. How to close PPF account before maturity? Like all investments, PPF also has a maturity period after which the account can be closed and money can be withdrawn. However, when it comes to closing the PPF account before it matures, things become really nasty. There is absolutely no option of doing that unless the account holder suddenly dies! That’s a sad scenario but that is the only option. If the account holder dies before the account matures, the nominee or the legal heir of the account holder gets to close the account prematurely upon submission of necessary documents. Once the documents are verified for accuracy, the account will be closed and funds will be handed over to the nominee or the legal heir.

What if there is no nominee or no legal heir? In such a situation, the nearest kin of the account holder can claim the money subject to proper legal verifications by competent authorities. Upon successful verification, the account will be closed and the money will be handed over to the nearest kin of the deceased person and the account will be closed before maturity.

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