Can we withdraw money from the PPF account before maturity?
One of the most common questions people ask before opening a PPF account is "can we withdraw money from a PPF account before maturity?". One reason for this question is the long tenure of the PPF account (15 years). The short answer to this question is Yes, you can withdraw money from PPF before 15 years but you can only withdraw a maximum of 50% of the balance at the end of the fourth year, and that too only after completing 5 years. This means for the first 5 years you cannot withdraw any amount from PPF.
Liquidity is always an issue with long term investment options and you should not be putting any money you need in immediate future on long-term investments like PPF. They are for big-ticket items like marriage, higher education of your children, etc.
One of the most common questions people ask before opening a PPF account is "can we withdraw money from a PPF account before maturity?". One reason for this question is the long tenure of the PPF account (15 years). The short answer to this question is Yes, you can withdraw money from PPF before 15 years but you can only withdraw a maximum of 50% of the balance at the end of the fourth year, and that too only after completing 5 years. This means for the first 5 years you cannot withdraw any amount from PPF.
Liquidity is always an issue with long term investment options and you should not be putting any money you need in immediate future on long-term investments like PPF. They are for big-ticket items like marriage, higher education of your children, etc.
You must manage your other expenses and emergency expenses via liquid fixed deposits, cash in saving account, and fixed maturity mutual fund which allows you to break them anytime.
If you need money urgently, You can also take a loan against the PPF, but it cannot exceed 25 percent of the balance in the preceding year. The loan is charged at 2 percent till 36 months, and 6 percent for longer tenures.
How much money you can withdraw from PPF before maturity?
As I said, you cannot withdraw any money from the Public Provident fund if your account is not five years old. After 5 years, you can withdraw 50% of the total balance your account has at the end of the preceding year e.g. end of the 4th year. If you withdraw money lets say after 7 years, then you can withdraw maximum of 50% of immediate preceding year e.g. 6th year.If you need money urgently, You can also take a loan against the PPF, but it cannot exceed 25 percent of the balance in the preceding year. The loan is charged at 2 percent till 36 months, and 6 percent for longer tenures.
Till a loan is repaid, you can't take more. If you dip into your PPF account, make sure to put back the amount at the earliest. Withdrawing from long-term savings is not a good strategy if you do it frequently, It can dent your overall retirement planning.
The PPF is especially useful for risk-averse investors, self-employed professionals, and those not covered by the Employees Provident Fund and other retrial benefits. It's not great in terms of liquidity and that's why you should not put all your savings in PPF.
The PPF is especially useful for risk-averse investors, self-employed professionals, and those not covered by the Employees Provident Fund and other retrial benefits. It's not great in terms of liquidity and that's why you should not put all your savings in PPF.
You should invest some of your savings in a fixed deposit which you can break in one day, must keep some money in a saving account because this is what you can use anytime and should keep some money on Fixed Maturity Plans, a type of mutual fund which invests in debt instrument and allows you to break when you need.
I don't recommend Premature withdrawal from Public Provident Fund and it should be your last option, of course before you think of a loan because you will always pay more interest on a loan than you earn on any of your investments. As I said ideally you should sufficient amount in FD and Saving account to avoid premature withdrawal from PPF.
I don't recommend Premature withdrawal from Public Provident Fund and it should be your last option, of course before you think of a loan because you will always pay more interest on a loan than you earn on any of your investments. As I said ideally you should sufficient amount in FD and Saving account to avoid premature withdrawal from PPF.
Which one is better withdraing money from PPF or taking loan against PPF?
ReplyDeleteStrictly speaking no withdrawal should be permitted from the PPF as it is a part of social security.
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