A PPF account has a 15-year lock-in, but you are not fully stuck. Partial withdrawal is allowed from the 7th financial year — up to 50% of the balance at the end of the 4th preceding year or the preceding year, whichever is lower, once per year. A loan against PPF is available in Years 3–6 (up to 25% of the balance). Premature closure is allowed from the end of the 5th year in special cases with a 1% interest penalty. Every PPF withdrawal is completely tax-free under its EEE status.
PPF Withdrawal Timeline
The PPF Scheme 2019 fixes clear rules for each kind of access, based on how many financial years the account has been open. The 15-year count starts from the end of the financial year in which you opened the account.
| Year / Period | Access | How Much | Key Condition |
|---|---|---|---|
| Year 1–2 | None | No withdrawal or loan | Complete lock-in |
| Year 3–6 | Loan only | Up to 25% of balance at end of 2nd preceding year | Repay within 36 months; 1% interest above PPF rate |
| Year 7 onwards | Partial withdrawal | Up to 50% of lower of yr-4-preceding / preceding-year balance | Once per financial year; Form-2; no reason needed |
| Year 5 onwards | Premature closure | Full balance, 1% interest penalty | Only for illness, higher education or NRI status |
| End of Year 15 | Full withdrawal | Entire corpus | Form-C, or extend the account |
Rules per PPF Scheme 2019, Dept of Economic Affairs, Ministry of Finance. All amounts are tax-free.
You cannot close a PPF account early just because you want the money. Premature closure (from the end of Year 5) is allowed only for a life-threatening illness of the account holder / spouse / dependent children, higher education, or a change to NRI residency status — and it costs you 1% interest across the whole tenure.
PPF Loan vs Partial Withdrawal
In Years 3–6 a loan is your only option; from Year 7 you can withdraw. A loan keeps your corpus intact and earning interest, but must be repaid; a partial withdrawal is permanent but has no repayment or interest cost.
Loan against PPF
- Up to 25% of balance at end of 2nd preceding year
- Repay principal within 36 months
- Interest at 1% above the PPF rate
- Principal stays invested and keeps compounding
- No fresh loan until the earlier one is cleared
Partial withdrawal
- Up to 50% of the lower eligible balance
- No repayment and no interest cost
- Once per financial year, no reason required
- Reduces your corpus permanently
- Submit Form-2 to the bank or post office
How Much Can You Withdraw?
Say you are in the 8th year of your PPF. Balance at the end of the 4th preceding year was ₹4,00,000; balance at the end of the preceding year was ₹6,50,000. The limit uses the lower of the two.
Partial withdrawal limit
If you took a loan instead (Yr 3–6)
For the July–September 2026 quarter the PPF rate is 7.1% p.a., unchanged for the sixth straight quarter. Because interest is exempt under Section 10(11), that 7.1% is a fully tax-free return — equivalent to well over 10% pre-tax for someone in the 30% slab, which is why leaving the corpus in and taking a loan often beats withdrawing.
PPF Maturity — Close or Extend
At the end of 15 years you have three choices. Extension is done in 5-year blocks and can be repeated any number of times.
| Option | What Happens | Withdrawal During Extension | Action |
|---|---|---|---|
| Close the account | Full corpus paid out; account closed | N/A | Form-C |
| Extend without contributions | Balance keeps earning interest; no new deposits | Any amount, once per year | Do nothing — auto-extends |
| Extend with contributions | Keep depositing ₹500–₹1.5L/year | Up to 60% of opening balance over the 5-year block | Form-H within 1 year of maturity |
A default (no election within a year of maturity) is treated as passive extension without contributions.
Not sure how PPF fits with your 80C limit and other deductions? Get a quick plan.
Plan tax savings →PPF Withdrawal Tax — EEE Status
PPF enjoys EEE (Exempt-Exempt-Exempt) treatment — the best of any mainstream Indian savings instrument. There is no capital-gains tax and nothing to report as income on withdrawal.
- Contribution exempt: up to ₹1.5 lakh deductible under Section 80C — but only in the old tax regime.
- Interest exempt: annual interest is fully exempt under Section 10(11) and is not added to your income.
- Withdrawal exempt: partial withdrawals, premature closure and maturity proceeds are all completely tax-free.
If you have opted for the new tax regime, you cannot claim the ₹1.5 lakh 80C deduction on PPF contributions — but the interest and every withdrawal remain fully exempt. PPF is one of the few products whose maturity stays tax-free either way.
PPF vs Other Tax-Saving Options
PPF is debt, not equity, so it has no capital-gains angle. Contrast that with market-linked options whose gains are taxed as capital gains under the regime effective 23 July 2024.
| Instrument | Lock-in | Return / Rate | How gains/interest are taxed |
|---|---|---|---|
| PPF | 15 yrs | 7.1% (Jul–Sep 2026) | Fully exempt (EEE) |
| NSC | 5 yrs | 7.7% | Interest taxable at slab (accrued interest re-qualifies 80C except final year) |
| ELSS | 3 yrs | Market-linked | Equity LTCG 12.5% above ₹1.25L; STCG 20% |
| Sukanya Samriddhi | 21 yrs | 8.2% | Fully exempt (EEE) |
| Sovereign Gold Bond | 8 yrs | 2.5% + gold | Interest at slab; redemption at maturity capital-gains exempt |
Small-savings rates are for the Jul–Sep 2026 quarter (Ministry of Finance). Capital-gains rates per the regime effective 23 Jul 2024.
PPF withdrawal suits you if
- You are past Year 7 and need funds without a loan
- You want a permanent, tax-free drawdown
- You do not want a repayment obligation
Prefer a loan / leave it if
- You are in Years 3–6 (withdrawal not yet allowed)
- You want the corpus to keep compounding at 7.1%
- The need is short-term and repayable
Filing your ITR and claiming Section 80C on PPF? Let a CA handle it end to end.
File ITR with a CA →PPF Withdrawal — Frequently Asked Questions
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