Q. I am a 50-year-old working individual. My Public Provident Fund is maturing this year. What all options I have after it matures? Can I extend it or should I withdraw the money and use invest it somewhere else? Kapil Rastogi
A. Firstly, congratulations on remaining committed to your Public Provident Fund investment for 15 long years. It is a great investment option that not only provides capital safety but also provides guaranteed returns. Besides closing the PPF account and withdrawing the corpus, you have a few more options that you can explore.
Extend The Account With Contribution
If investing in PPF has helped you build the desired corpus and you want to remain invested in a safe instrument, you can choose to extend your account in blocks of 5 years. Your tax benefits will remain the same and you can claim deductions for an amount up to Rs. 1.5 lakh under Section 80C. Your returns earned will remain tax-free.
Extend The Account Without Contribution
You can keep your PPF account open without making any fresh contribution. In case you do not withdraw your corpus when the account matures after 15 years, your PPF account will automatically get extended for 5 years. No fresh contribution is required for this and you will remain invested for the next 5 years. However, on the taxation front, you will not be able to claim Section 80C benefits as there is no fresh contribution from your side. Your investment would continue to earn interest and remain tax-free. The premature withdrawal rules will not apply in this case and you can withdraw it anytime after PPF matures. But do note that you can withdraw only once in a financial year if you have not applied for an extension.
Do Examine The Need For Extension
Your decision on how to use your PPF proceeds depends on your age, risk profile and financial goals. Before considering an extension of the PPF account, do compare the returns you will earn if you will invest the maturity proceeds in any other instrument. For example, putting your proceeds in an equity mutual fund may get you better returns in the long term, but you’re unlikely to get better returns than PPF from a fixed deposit. Either way, if you do not require your maturity proceeds right away, it would be advisable to remain invested in PPF due to the attractive, tax-free returns till your retirement. In retirement, you can walk away with a significantly bigger corpus, thanks to compounded growth.
You can seek the help of a financial advisor to make a safe move.
Have a question on personal finance? Ping me on Twitter at @adhilshetty with the hashtag #AskAdhil. The writer is CEO, BankBazaar.com, an online marketplace for loans and credit cards.