This is an interesting fact that not a lot of people, and in fact not a lot of banks know. And at PersonalFN, we have some clients who have actually informed their banks of what the correct PPF rules are!
Once your account matures, you have 3 choices.
Either you can withdraw your maturity amount, or you can extend your account by a 5 year block, as many times as you want and make fresh contributions, or you can extend the account without making any further contributions, and continue to earn interest on it every year.
If you decide to withdraw your money, your maturity value is exempt from tax.
If you decide to extend your account and continue making fresh contributions, you can extend it for a block of 5 years at a time, as many times as you want, you can also make withdrawals from the account, up to 60% of the account balance that was there at the beginning of the extended period. Just remember, if you choose to extend your account, submit the necessary documentation that is Form H, for extension before one year passes from the maturity date.
If you choose to extend your account without making any fresh contributions, you can do this too. In this case, any amount can be withdrawn without any restriction, however you can only withdraw once per year. The balance will continue to earn interest till it is withdrawn.
As per the PPF rulebook:
Subject to the provisions of sub-paragraph (3) a subscriber may, on the expiry of 15 years from the end of the year in which the initial subscription was made but before then expiry of one year thereafter, may exercise an option with the Accounts Office in Form H, or as near thereto as possible, that he would continue to subscribe for a further block period of 5 years according to the limits of subscription specified in paragraph 3.
And also regarding withdrawals during these extension periods, here is the rule:
In the event of a subscriber opting to subscribe for the aforesaid block period he shall be eligible to make partial withdrawals not exceeding one every year by applying to the Accounts Office in Form C, or as near thereto as possible, subject to the condition that the total of the withdrawals, during the 5 year block period, shall not exceed 60 percent of the balance at his credit at the commencement of the said period.
On a separate but important note, the bank that you open your PPF account with is acting only as a collection center. Bank officials are not supposed to know the PPF rules, you are. Surprising, but true.
In fact, many customers receive inaccurate advice on the PPF from the bank officials themselves. The best way to safeguard your money is to know the rules yourself.