Premature Closure of PPF Account is now allowed under Public Provident Fund Scheme, 1968. The Government of India made some changes in PPF rules and the scheme is now known as Public Provident Fund (Amendment) Scheme, 2016 Paragraph 9, for sub-rule 3(C) which will facilitate the premature closure of PPF Account.
Eligibility for Premature of PPF Account:
Not all PPF Account is eligible for premature closure, only those account which have completed five financial year is now eligible for such closure.
A subscriber needs to submit a written applications to account officer for premature closure of his/her PPF Account or account of a minor to whom he/she is guardian. The account officer may allow premature closure on any of the following grounds- medical grounds & to meet expense for higher education.
Medical Grounds: The PPF account closure balance is required for the treatment of serious ailments or life threatening diseases of the account holder, spouse or dependent children or parents, on production of supporting documents from competent medical authority.
Higher Education: The PPF account closure balance is required for higher education of the account holder or the minor account holder, on production of documents and fee bills in confirmation of admission in a recognized institute of higher education in India or abroad.
Penalty for Premature Closure:
For premature closure of account, the subscriber will get one percent less interest on interest rate applicable from time to time in PPF Scheme payable on deposit held in PPF Account from the opening of account till such closure.
Example: From FY 2006-07 to FY 2010-11 the rate of interest on PPF deposit was 8% but for premature closure the subscriber will be eligible for 7% interest rate for that period. For FY 2011-12 instead of 8.6% they will eligible for 7.6% and so on.
PPF Account Closure for NRI:
Government has recently amended the PPF Rules and when a resident becomes Non Resident Indians his/her PPF account shall be considered deemed to be closed.