PPF extension with contribution

A PPF account matures after 15 years. At that point the subscriber does not have to withdraw the money — the account can be extended in blocks of 5 years, and the workbook gives two ways to do this. This entry covers the version where contributions continue.

To extend with contribution, the subscriber must actively choose it, and the choice has to be made within one year before the date of maturity — filed on Form-4. Miss that window and the account defaults to the other option, extension without further contribution.

Once extended with contribution, the account can keep running indefinitely, in further 5-year blocks, each time requiring a fresh request with contributions.

Withdrawal cap. During an extension-with-contribution block, the subscriber may withdraw a maximum of 60% of the balance standing as on the date of that extension — not 60% of the balance at any later point, and not of the original maturity balance if this is a second or third extension block.

How the withdrawal can be taken. The 60% can be withdrawn in one go, or spread over several years, subject to a maximum of one withdrawal in a year.

The choice is locked in. Once made, the with-contribution or without-contribution choice cannot be switched for that block. If money is deposited without the correct option having been chosen, it earns no interest, and no Section 80C deduction is available on it either.

Illustrative figures. Mr Bose's PPF account matures with a balance of Rs 40,00,000. Nine months before maturity, he files Form-4 to extend with contribution for a further 5-year block, continuing to deposit the maximum Rs 1,50,000 a year.

Maximum withdrawable from this block   = 60% x Rs 40,00,000 = Rs 24,00,000

He can draw the full Rs 24,00,000 in one go in year 2 of the extension, or take it as Rs 6,00,000 a year across four of the five years — but he cannot take more than one withdrawal in any single year, and he cannot exceed the Rs 24,00,000 ceiling set at the point of extension, even as his balance grows further with continued contributions and interest.

Chapter 5 (Retirement Products), section 5.1.3, "Public Provident Fund," under "Extension of account tenure," sets out the with-contribution route, Form-4, the one-year election window and the 60% withdrawal cap. Expect a computation question applying the 60% cap to a given maturity balance, and a question on the Form-4 filing deadline.

• The election window is within one year before maturity, not any time after. Missing it defaults the account to extension without contribution, which the workbook treats as a different, non-reversible path.
• The 60% cap is measured on the balance at the date of extension, not the original maturity balance from 15 years, and not the balance on the date of withdrawal.
• Only one withdrawal is allowed per financial year, whether the client takes the full 60% at once or spreads it.
• The with/without-contribution choice cannot be switched once made for that 5-year block — advise the client before the window closes, not after.