PPF Withdrawal and Loan Rules: The Often-Missed Liquidity
Partial withdrawals after year 7, loans between year 3-6, and the 5-year extension trick.
PPF is famous for its 15-year lock-in — but it's more flexible than most people realise. Loans from year 3 and partial withdrawals from year 7 give you real liquidity without breaking the account.
Loan Against PPF (Years 3-6)
You can take a loan of up to 25% of the balance at the end of the 2nd preceding year. Interest is just 1% above the prevailing PPF rate — currently ~8.1%. Must be repaid in 36 months. Cheapest emergency credit available to most Indians.
Partial Withdrawal (Year 7 Onwards)
From financial year 7, you can withdraw once per year, up to 50% of the balance at the end of the 4th preceding year (or current year, whichever is lower). No questions asked, no purpose declaration needed.
Project your PPF balance: PPF Calculator → https://calculatordesk.in/ppf-calculator
The Extension Trick
At maturity (year 15) you can: withdraw fully, leave the corpus untouched (still earns interest, no new deposits), or extend in 5-year blocks with continued contributions. The third option is powerful: tax-free contribution and tax-free interest continue, plus you can withdraw up to 60% of the start-of-block balance during each 5-year extension.
Frequently Asked Questions
Is PPF interest fully tax-free?
Yes. PPF is EEE — exempt at contribution (80C), exempt during accrual (interest tax-free), exempt at withdrawal (maturity tax-free). Few other instruments offer this.
Can I close PPF before 15 years?
Premature closure is allowed after 5 years only for serious illness (self/family), higher education, or change of residency status. 1% interest penalty applies.
What if I miss a year's deposit?
Account becomes inactive. Revive by paying ₹50 penalty per missed year plus minimum ₹500 contribution for each missed year. Until revived, no loan or withdrawal is allowed.