- PPF accounts can be extended in blocks of 5 years
- PPF account holder can make withdrawals even during the extended period
- Partial withdrawals from PPF accounts are not taxable
Financial planners say that if there is no immediate fund requirement, one should extend the PPF account beyond 15 years. "After the 15 years initial block, it is better to extend the PPF account," says Ramalingam K, director and chief financial planner at Chennai-based Holistic Investment Planners (www.holisticinvestment.in). "There is no need to contribute and also he/she can withdraw once in a year."
A PPF account holder can make partial withdrawals even during the extended period. Withdrawals from PPF account are not taxable. In case the PPF account holder has opted for the without-contribution mode for the extended period, any amount can be withdrawn. But only one withdrawal from PPF is allowed per year.
PPF accounts currently fetch an interest rate of 7.6 per cent. "It (PPF) is yielding 7.6 per cent tax-free - which is better than bank fixed deposit or FD rates. Even senior citizen FD rates are lesser than this. So instead of closing it, you can extend it," adds Mr Ramalingam.
"Extension of PPF account is attractive - considering its slightly higher rate of return - regardless of your tax bracket. Even if you come under zero tax bracket, PPF extension is attractive," he adds.
The interest income from bank fixed deposit or bank recurring deposit is fully taxable.