In a severe cash crunch, you might have to tap the accumulated corpus in your PPF account. The new PPF rules issued by the Ministry of Finance allow premature closure of the PPF account of a subscriber only in case of certain specified circumstances. Here's how to go about it.

Conditions

To close the PPF account prematurely, the account should have completed at least five financial years. The account can be closed only to serve the following purposes: · Treating serious ailments or life threatening diseases of the account holder, spouse, dependent children or parent. To fund higher education of the account holder or minor account holder.

Written application

To close a PPF account prematurely, a written application needs to be submitted to the accounts office where the account is held. The application needs to state the reason for the account holder opting to close the account.

Documentation

The application should contain a copy of the PPF passbook. It should also be supported by documents from a competent medical authority if the purpose cited is medical treatment. If the purpose is supporting higher education, documents such as fee receipts, bills and confirmation of admission should be provided.

Penal interest

Once the documents are submitted and verified, the application may be approved for closure. However, a penal amount is deducted from the amount payable to the account holder. This amount is equivalent to one per cent less interest on the interest rates applicable from the date of opening the account till the date of premature closure.

The provision for partial withdrawal from PPF account after completion of 7th year of the account is still valid and no penal interest is charged.

It is important to note that the account holder cannot apply for premature withdrawal to fund the higher education of spouse or dependent child.

Premature closure of the account of a minor can be carried out by his guardian.