My PPF account is maturing: should I extend or open a new one?

Published: February 17, 2021 at 10:21 am

Last Updated on February 17, 2021 at 10:21 am

When we open a PPF account, the maturity date seems far away; However time flies, and before we realise it, it is time to make a decision: should I extend my PPF account for another five years or should I open a new one? The answer always depends on one’s personal circumstances, and extension is not the obvious choice—a discussion.

Let us first consider the options and rules: We all know that a PPF matures after 15 years. Or 15 financial years from the FY of opening. For example, an account opened in FY 2000-01 (or before 31st March 2001) will mature on 1st April 2016. There are three options available to a subscriber after maturity. (1) Close the account and be done with it or open a fresh account. (2) Keep the account open without further contributions. (3) Extend the account for 5 years with further contributions.

A PPF account can be extended in five-year blocks for life (option 3). The bank or post office staff are expected to be familiar with these options and associated withdrawal limits, but many investors have complained about the difficulty in extending, particularly the second time (15 +5 years after account opening). Therefore before approaching the bank staff, it would be best to understand the rules.

The key difference between option 2 and 3 is the withdrawal limit. In the case of option 2, the accumulated corpus will continue to earn interest as decided each financial year and one withdrawal per year for any amount can be made. No further contributions are possible.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

In the case of option 3, the subscriber can only withdraw 60% of the account balance at the start of the extension either in one-shot or spread over the five year period.

Now, there is no difference in the interest rate or tax treatment between opening a new PPF account after maturity or extending it for five-year blocks. Fresh contributions, in either case, will earn the interest rate applicable for each quarter.

So the consideration is primarily about the accumulated corpus. One can think of two use-cases:

  • Investor starting PPF for retirement; 15 years are up. Less than 15 years remaining to retirement: Retain old PPF account by extending for five years. Redemptions can be made to align asset allocation with future cashflow needs.
  • Investor starting PPF for retirement; 15 years are up; 15 financial years or more available before retirement.
    • You can keep extending for five years if your retirement planning and asset allocation is already in place. Redemptions can be made to reset the asset allocation.
    • If there is a huge disparity in asset allocation (that is too little equity), then you can consider closing the PPF account and opening a new one. The associated market risks should be kept in mind. Investors refuse to let go of the “benefits of PPF (or EPF)” but too much of it can result in a lower retirement corpus in future. As established before, a SIP in a gilt fund has the potential (not a guarantee) to beat PPF even after-tax: PPF vs Gilt mutual funds: Which has done better over 15 years?
  • PPF is also used to accumulate for a child’s future. Suppose the account is in the child’s name with the parent as guardian. If the account was opened immediately upon the birth of the child, the maturity date would be a few years before graduation from school. In this case, even an extension without further contributions would do as the liquidity is maximum – the full amount can be withdrawn at any time. In this case, the PPF account should not be transferred to the child after she turns 18 as there is no benefit in doing so.
    • The account can also be extended with contributions to handle PG expenses or marriage.
  • Some parent would like to extend the PPF with further contributions until the child turns 18 and then transfer the active account in their name. There is nothing wrong with this, but if 15 years can pass quickly, five years pass thrice as fast. The children will have to be responsible enough to extend every five years – which at the time of writing has to be done offline.
    • I would recommend closing the minor PPF account after it has run its course (pay for UG or PG etc.). The child can open a fresh PPF account when they start earning. This would give them a fresh 15Y to build a corpus from scratch and appreciate the power of compounding on their own. This would also allow them time to ‘grow up’ and not crib about the offline transaction if that is the case even then. There is a certain joy in watching the PPF account from zero to something grand even if the rates are lower in future: Worried about low PPF interest rate? Here is why it could drop further

In summary, the fate of a matured PPF account (as with all personal finance decisions) depends on our need and our appreciation of risks – either market linked risk or fixed income risk. An extension is not an obvious choice.


Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.

  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)