Friday, May 22, 2015

Can I withdraw money from PPF account before maturity?

Can we withdraw money from PPF account before maturity?
One of the most common questions people ask before opening a PPF account is "can we withdraw money from PPF account before maturity?". One reason for this question is long tenure of PPF account (15 years). The short answer of 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. Which means for first 5 years you cannot withdraw any amount from PPF.

Liquidity is always an issue with long term investment option and you should not be putting any money you need in immediate future on long term investment 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.

How much money you can withdraw from PPF before maturity?

As I said, you cannot withdraw any money from Public Provident fund if your account is not five years old. After 5 years, you can withdraw 50% of total balance your account has at the end of preceding year e.g. end of 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 per cent 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. You should invest some of your saving in fixed deposit which you can break in one day, must keep some money in saving account because this is what you can use it anytime and should keep some money on Fixed Maturity Pans, a type of mutual fund which invest in debt instrument and allows you to break when you need.

Can I withdraw money from PPF account before maturity.

I don't suggest Premature withdrawal from Public Provident Fund and it should be your last option, of course before you think of loan because you will always pay more interest on loan then you earn on any of your investment. As I said ideally you should sufficient amount in FD and Saving account to avoid premature withdrawal from PPF.


  1. Which one is better withdraing money from PPF or taking loan against PPF?

  2. Strictly speaking no withdrawal should be permitted from the PPF as it is a part of social security.