What you need to know about getting a loan from your PPF account at 1%.

A loan from a PPF account will be obtained during the third and sixth fiscal year after the launch of the PPF account.Loan Against PPF

The Public Provident Fund or PPF account, although it has a 15-year lockdown, offers pre-term credits and a partial withdrawal option. A loan from the PPF account can be used between the third and sixth fiscal year after opening the PPF account. PPF’s partial withdrawal facility is allowed from the seventh year. A PPF account manager can also close the account early after five years if they need to pay for further education or medical care. Partial PPF withdrawals are possible after the sixth financial year or from the beginning of the seventh financial year. You can make a maximum of one partial withdrawal in one year. The overall partial withdrawal number is set at 50% of the account balance at the end of the fourth fiscal year or 50% of the account balance at the end of the previous year, whichever is less, and these partial withdrawals are not taxable.

It is partially withdrawing during the extended maturity period.

PPF subscribers have the luxury of continuing to contribute to their PPF account even though it has matured. In this case, the money accrued in the account earns interest until it is locked. Moreover, under this prolonged tenure, the subscriber will make one partial withdrawal of any sum in each fiscal year.

However, the partial payout rule will change during this extended expiration period. one year during this extended term. Still, the total payout amount in one block (over the entire five-year period) must not exceed 60% of the account balance at the beginning of each block.

For example, say, suppose your PPF account balance is Rs 10 lakh at the end of 15 years. If you wish to prolong your account for another five years with contributions, the highest partial withdrawal you can make during that period is Rs 6 lakh.

Loan secured by a PPF account.

After opening a PPF account, you can borrow against your PPF balance starting in the third year and continuing until the sixth year. At the end of the second year, or the year before the year in which the loan is paid for, the loan volume is limited to 25% of the balance in the PPF account. PPF loans are available at 1% interest, but you will not accumulate interest on the loan number. As a result, the actual cost of a PPF loan is the PPF interest rate plus 1%. A PPF loan will cost you 8.1%  at the present interest rate.

Second, you eliminate the compounding impact on the interest amount obviated as a result of the loan. A loan against a PPF account is available in the third and sixth years after the account is opened. According to financial managers, since PPF loans are only available in the early stages, the compounding impact of the interest foregone would be much higher at the time of maturity.

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