Govt has recently taken various steps to make the PPF or Public Provident Fund account more useful in need. As per the new PPF rules 2016, now you can close your PPF account completely before 15 years of maturity period also.
That means, if you have a PPF account in SBI or with any other bank, as per the new Premature Closure of PPF account rules 2016, you can now withdraw your 100% PPF balance before 15 years of maturity. This seems like a good news according to me, as people will feel relax and find some alternative of personal loan.
When You Can Close Your PPF Account before 15 years?
But, there are certain conditions based on what only you can withdraw full PPF balance. Although few of them are old PPF rules only, but still few more has been added.
- In case of any medical emergency situation, you can close your PPF account
- Higher education is another reason for which premature closure of PPF is allowed
- Death of account holder (It is an existing rule only and very obvious)
But, remember that, you have to complete at least 5 years of continuing the PPF account before thinking about PPF account closure.
But there is a PPF Penalty for Pre-closure of Account
But, the rule is not finish here. In case you want to close your PPF account before completing 15 years, then you have to carry a penalty for closing PPF account before maturity. As per the new rules, Govt will deduct an interest rate of 1% from he date of opening the PPF account and recalculate the entire PPF balance.
Let’s try to understand this fact by a small example here. E.g. I have opened PPF account in 2010 and the PPF interest rates have been 8.6%, 8.6%, 8.8, 8.7%, 8.7%, 8.7% and 8.1% including current FY [example data only]. But if you want to close your PPF account in 2016, then the interest rate for all these years will become 1% less. That means they will become 7.6%, 7.6%, 7.8%, 7.7%, 7.7%, 7.7% and 7.1%. Which means a reduction of interest or income. But this is not a loss of 1% on actual, as PPF is growing with compound interest rate formula.
So, what is your though on this new PPF rules about closing the account before maturity? Do you think now PPF is the best alternative of a personal loan? Share your thoughts here by writing a simple comment below.