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Severe second wave of Covid-19 has hugely impacted the lives of people from all spheres. It has not only dented the health infrastructure but made it difficult for ordinary masses to meet their ends owing to the financial crunch. Several are considering premature withdrawals from their investment schemes such as Provident Fund (PPF), National Pension System (NPS) or fixed deposits (FD) in case of emergency cash requirements. As drawing money entails a detailed list of dos and don’ts, here are rules or policies related to permitted withdrawals, penal charges and taxation.
Public Provident Fund (PPF)
As per PPF guidelines, funds can be withdrawn from the PPF account only after the period of five years starting from the year it has been opened. But a maximum of 50% of the total sum can be taken out prematurely. However, the withdrawals can only be made once in a financial year.
Moreover, partial/premature withdrawals from the PPF account are exempted from tax. To withdraw the fund, one needs to fill and submit Form C in the concerned branch of the bank where the PPF account lies.
Employees’ provident Fund (EPF)
Partial withdrawal of fund from PF account is taxable with few exceptions such as employment termination and medical emergencies. However, the withdrawal becomes tax-free after the completion of the five-year tenure.
Fixed Deposits (FDs)
In case of Fixed Deposits (FD), the depositor cannot avail the facility of premature withdrawal. He can only withdraw before time, if he closes his FD account before the date of maturity. Moreover, one has to bear penalty charges ranging from 0.5 percent to 1 percent for liquidating a fixed deposit before its stipulated time period.
National Pension System (NPS)
Under NPS, a government sponsored pension scheme, one can only withdraw the sum after the completion of three years. After three years, investors can take out only 25 percent of the total invested sum. Withdrawals under this scheme are exempted from tax.
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