A reader asks, “Is it attainable to make use of PPF as a supply of normal earnings? For instance, withdraw 7 per cent per 12 months”.
As soon as a PPF account has accomplished 15 years, there are two methods to maintain it alive: (1) With out additional contributions (curiosity will probably be paid) and (2) with contributions (Rs. 500 min per 12 months).
“Extending a PPF account” account implies possibility 2 with contributions each 5 years. This selection have to be exercised inside one 12 months of maturity. After this, an “extension” won’t be attainable.
Choice 1 with out contribution just isn’t an “extension”, and the subscriber can withdraw any quantity as soon as each monetary 12 months till the corpus is absolutely depleted. A brand new ppf account will be opened provided that that is closed.
Within the case of possibility 2, yearly withdrawals are attainable. Nonetheless, the overall quantity withdrawn throughout the five-year block must be lower than or equal to 60% of the stability in the beginning of this block.
For instance, allow us to assume we have now prolonged a PPF account for 5 years with a stability of Rs. 40 lakhs. We will maintain it alive with Rs. 500 a 12 months (that is small in comparison with the stability and shall be ignored within the illustration). We will assume that the curiosity throughout this era is 7% yearly (this may change each quarter). We assume a withdrawal equal to 7% of the excellent stability is made in the beginning of every monetary 12 months.
The whole withdrawal made within the five-year block is Rs. 13.86 lakhs. The utmost quantity that may be withdrawn over the 5 years is Rs. 24 lakhs = 60% of Rs. 40 lakhs, the stability in the beginning of the extension interval.
So, the 7% withdrawals can simply be pulled off. Even when the PPF rate of interest retains reducing by 1% each 5 years, the 7% annual withdrawal will be continued with out breaching the utmost allowed restrict. Naturally, the PPF corpus may even maintain diminishing!
It have to be understood that this dialogue is barely about PPF withdrawals and never about making an attempt to beat inflation after retirement with earnings from PPF. For the reason that most that one can put money into PPF is barely Rs. 1.5 lakh a 12 months, the utmost corpus that may be attained after 15 years is restricted (even with a continuing rate of interest). Due to this fact, the utmost withdrawal can be restricted – sometimes a lot smaller than a retiree’s annual bills. PPF can, in precept, be used as one supply of earnings from a diversified retirement portfolio.
Many banks don’t encourage limitless five-year extensions, though it’s legally allowed! The scenario with put up workplaces just isn’t recognized. If an extension is now not allowed, the subscriber can revert to possibility 1 (maintain the account alive with out contributions) and steadily withdraw.
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