Premature Closure of PPF, NSC, KVP, MIS and SSY: The Cost

What it actually costs to close before maturity

You opened a government small savings account because it was the one place your money would not tempt you. Then the medical bill arrived, or the son’s admission fee, or the landlord changed his mind, and you went to the counter to get some of it back.

The man at the counter looked at your account and gave you a number. That number is right, and it is the whole of the rule for his scheme — and almost certainly not the rule for the other four. All five have a rule for what happens if you try to leave early. None of them charges the same thing, and two of them do not let you leave in the way most people assume.

Here is the honest version, scheme by scheme, with the cost in rupees so you can price your own exit before you walk in.

First: partial withdrawal and premature closure are different doors

The most common confusion in these schemes, and where most bad advice goes wrong. A partial withdrawal takes some money out and leaves the account alive. A premature closure shuts the account and ends it. Different eligibility, different ceilings, different forms, and in two schemes different rules about what happens to the interest.

Three of the five have no partial withdrawal whatsoever. If you hold an NSC, KVP or MIS and have been telling yourself you will “take half out when I need it”, you have been planning around a facility that does not exist.

PPF: the 1% is a rate cut, not a fee

Public Provident Fund Scheme, 2019 — G.S.R. 915(E) of 12 December 2019, amended G.S.R. 290(E), then G.S.R. 831(E) of 7 November 2023. You may close early on three grounds only: Full scheme guide: PPF rules, limits, withdrawals and tax.

1. Treatment of a life-threatening disease of the account holder, spouse, dependent children or parents, on medical reports from a treating medical authority.
2. Higher education of the account holder or dependent children, on documents and fee bills confirming admission to a recognised institute in India or abroad.
3. A change in your residency status, on a copy of your passport and visa, or your income-tax return.

No fourth. Not job loss, not a house purchase, not a business down turn, not a daughter’s wedding. The court cannot reach it either — para 15 says the balance is not liable to attachment under any order or decree for any debt.

And in every case the account cannot close before five years from the end of the year it was opened. An account opened in April 2022 clears that on 1 April 2028. Not five years from opening — five financial years counted from the following 31 March. Opened January 2022, the gate is 1 April 2027.

Then the penalty. Interest is allowed at a rate one per cent lower than the rate at which it has been credited. That is a cut in the interest rate, applied to the whole tenure since opening — not one per cent of your balance, and not a flat fee. Since November 2023, on an account extended past 15 years, the 1% applies only from the start of your current five-year block.

Deposit basis for this table: ₹1,50,000 deposited every year at the start of the financial year, interest credited each 31 March (para 7). These are tenure figures — how much the 1% costs if you close after N years of depositing.

Eligibility is a separate fact from tenure: an account opened April 2021 first becomes closable on 1 April 2027, by which point it holds six years of deposits. So in practice your first opportunity to use para 13 comes with a 1% charge of roughly ₹39,155, not ₹26,765.

Watch that last column anyway. ₹26,765 at five years, ₹1,90,171 at twelve — seven times as much, on a balance a little over three times larger. The penalty compounds against you precisely because your deposits have had longer to grow. Every year you wait makes the exit more expensive, which is the case for deciding early rather than at the worst moment.

For contrast, a single ₹1,50,000 lump compounded five years is ₹2,11,368. That is worth keeping in mind precisely because it is the number a lot of these tables print: a figure can be internally consistent and still describe a different product from the one you hold.

Partial withdrawal is friendlier, and it is the door most people should use. Para 10: from the 7th financial year, up to 50% of the lower of two figures — the balance at the end of the fourth year immediately before the year you withdraw, or the balance at the end of the preceding year. Once a year. Regular accounts only; a discontinued account is barred. Any loan must be repaid with interest first. No penalty and no rate cut.

So ₹4,00,000 at the end of your fourth year and ₹9,00,000 at the end of last year: you may take ₹2,00,000, not ₹4,50,000. The rule takes the lower of the two. Past 15 years, para 12(4) changes the ceiling to 60% of the balance at the start of the block, across the whole five-year block.

NSC: no partial withdrawal, and the early years pay almost nothing

National Savings Certificates (VIII Issue) Scheme, 2019 — G.S.R. 919(E) of 12 December 2019, amended G.S.R. 284(E). The 1989 Rules are rescinded, though NSI still serves them; that is where the phantom partial withdrawal comes from. Full scheme guide: NSC complete guide.

There is none. The word “withdraw” does not appear in the scheme. Para 7(1): the account “shall not be closed before maturity except in the following cases” —

1. Death of the account holder, or any or all holders in a joint account.
2. Forfeiture by a pledgee who is a Gazetted Officer, where the pledge conforms to the scheme.
3. When ordered by a court.

Your child cannot take money out for fees. You cannot take money out because you are ill. The only early exit is death, a court, or a pledge default — two of which happen to you rather than decisions you make.

Deposit basis: a single ₹1,000 deposit (or ₹1,00,000, scaled proportionally), opened on or after 1 April 2020. The last column is measured against the notified 7.7% maturity of ₹1,449.03 — see the vintage note below.

The first row is the one to remember. A death, or a court-ordered closure, inside the first year returns face value and nothing else. On a ₹1,00,000 certificate that is ₹44,903 of interest that never arrives. And the middle row hands you the savings-account rate of 4%, not the 7.7% the certificate is earning — as though the certificate had never existed.

The maturity figure is a vintage, and it changes the arithmetic. Para 5(2A) fixes maturity at ₹1,389.49 per ₹1,000. That back-solves to 6.80% — the rate in force on 1 April 2020, when G.S.R. 284(E) froze the table. At the notified 7.7% the maturity is ₹1,449.03. The two differ by a constant ₹59.54 per thousand, so the table above is measured against the notified rate throughout. Both figures are correct in their own instrument: the notified rate governs what a deposit earns, the gazette table is what the scheme says you are paid at maturity.

There is a structural trap in the table. The bands are frozen amounts, not compounded values. Closing at four and a half years pays ₹1,288.80; holding eight more weeks to maturity pays ₹1,449.03. That last step is worth ₹160.23 on a thousand, and it is the entire remaining term. The countdown narrows as you approach five years, which means the cost of closing an NSC is not a fixed fee, it is a countdown that only stops hurting right at the end.

The same rate reading applies here. Every Table-2 band is exactly ₹1,000 × 1.058^t, so premature closure pays 5.80% where the certificate runs at 7.7% — a gap of 1.90 percentage points, wider than KVP’s. With no partial withdrawal available and no grounds you can invoke, that gap is the entire cost of needing the money early.

KVP: the 30-month cliff, and why “breakable” is true in letter only

Kisan Vikas Patra Scheme, 2019 — G.S.R. 920(E), amended G.S.R. 283(E), G.S.R. 837(E), G.S.R. 52(E) and G.S.R. 324(E). Background: what KVP really is and who should use it.

Before two years six months, an ordinary holder cannot close it at all. Para 6(1) gives exactly three routes — death, Gazetted-Officer pledgee forfeiture, court order — and on those, para 6(2) pays principal plus simple interest at the Post Office Savings Account rate for complete months.

After two years six months you may close on demand, paid the figure in the gazette table that matches the year you opened. The scheme has been amended four times, and each amendment opens a new cohort with its own term and its own closure table. The one below is Table-5, inserted by G.S.R. 324(E) of 27 April 2023, and it governs every account opened on or after 1 April 2023 — that is, any account you can open today. If you are reading this holding an older account, your figures are lower than the ones below; the cohort table further down tells you which applies to you.

Deposit basis: a single ₹1,00,000 deposit, Table-5 bands (gazette-fixed amounts, not compounded). Figures as at the gazette position on 3 October 2026 — see the re-check note below this table.

Six more months, from 24 to 30, is worth ₹9,100. And the 4% simple route is not merely a foregone return — at 24 months you receive ₹1,080 per thousand where the scheme’s own 7.5% compounding would have given about ₹1,156. Closing early inside thirty months pays you the savings-account rate on a product you chose because it beats the savings account.

Why 115 months. Para 5(1E), inserted by G.S.R. 324(E): “The maturity period of an account opened on or after the 1st day of April, 2023 shall be nine years and seven months and the deposits made in the account shall double on maturity.” Nine years and seven months is 115 months, and that is your term. Your term is fixed when you open the account. It does not float with the interest rate: para 5(2) is an enabling clause that the Ministry of Finance exercises by gazette amendment, and every amendment opens a new cohort instead of repricing the old ones. When the rate fell to 7.4% in January 2023, the accounts opened in October to December 2022 kept their 123 months and only the new January to March 2023 cohort got a different term. So do not work your own term out from the rate — read it off your account opening year, in the table below.

And here is the number the table is really telling you. Every one of the fifteen Table-5 bands is exactly ₹1,000 × 1.065^t — the whole schedule back-solves to 6.50% a year, flat at every row. So closing a KVP early does not cost you a fee. It pays you 6.50% where the scheme runs at 7.5% — a gap of 1.00 percentage point, on the entire balance, for every year you leave early. That is the cost, and it is invisible if you only read the rupee figures. Quote the table as published rather than re-deriving it, but do read the rate out of it.

Which table applies to you. Ask your passbook, or your opening year, before you use any figure on this page:

A note on keeping these figures current. A quarterly rate revision does not move the bands or the term by itself — that needs a fresh gazette amendment, and a new amendment usually means a new cohort and a new table again. So treat the Table-5 figures above as a position as at 3 October 2026, and check them against the gazette each quarter, exactly as you would check the rates. The 5.90% Table-2 schedule still governs accounts opened between April 2020 and September 2022, and it is the one to quote if that is your cohort.

MIS: the only scheme with a genuine percentage-of-deposit penalty

National Savings (Monthly Income Account) Scheme, 2019 — G.S.R. 917(E), amended G.S.R. 286(E). Para 6 lets you close any time after one year, on Form-2, with no reason required: Full scheme guide: MIS post office guide.

• Closed on or before three years: 2% of the deposit deducted.
• Closed after three years: 1% of the deposit deducted.

It is a percentage of the deposit, not your balance. MIS pays interest out monthly (para 5(2)), so the balance tracks what you put in and the deduction is small in absolute terms — ₹2,000 or ₹1,000 on a lakh.

Deposit basis: a single ₹1,00,000 deposit.

The interest you have already collected is yours and does not come back — but it also does not compound, because unclaimed interest earns nothing further (para 5(3)). Four years on a lakh at 7.4% is ₹29,600 simple, not the ₹34,325 a compounding assumption would give.

One thing to check if your account is old. Accounts opened before 13 February 2006 paid a 10% maturity bonus, and from 8 December 2007 a 5% bonus. Closing early forfeits it — ₹10,000 on a lakh, ten times the 1% deduction. Those provisions are in the rescinded 1987 Rules; the 2019 Scheme contains no bonus at all. They matter only if you hold an account opened before December 2011, and the dates to check are the pre-2011 ones above.

SSY: the only scheme with no penalty on early exit at all

Sukanya Samriddhi Account Scheme, 2019 — G.S.R. 914(E), amended G.S.R. 288(E). The outlier in the best way. Full scheme guide: SSY rules for parents.

Partial withdrawal, para 8 — for the account holder’s education only. Up to 50% of the balance at the end of the financial year preceding the year of application, once she attains 18 or passes the tenth standard, whichever is earlier. Lump sum or instalments, once a year for up to five years, capped at the actual fee in the offer of admission or fee slip. It is a withdrawal: the account stays open and the scheme keeps running.

The age gate bites earlier than most parents expect. A daughter who passes Class 10 at fifteen has two years of head start.

Marriage is not a withdrawal. Para 9(2) allows closure of the whole account before 21 years, on a declaration on non-judicial stamp paper attested by a notary, with proof of age, filed no earlier than one month before and no later than three months after the marriage. She cannot take half the money and leave the account.

Premature closure, para 7(3) — and read this carefully, because it is the best deal on the page. Where the accounts office is satisfied that continuing the account causes undue hardship on extreme compassionate grounds — a life-threatening disease of the account holder, or the death of the guardian — it may allow closure after complete documentation, and:

the outstanding balance with interest due as applicable to the Scheme shall be paid

That is the scheme rate. No reduction. Note also that this five-year floor runs from the date of opening, not from the end of the opening year as PPF’s does — a different test, and the difference is worth a month or more depending on when you opened.

Deposit basis: ₹1,50,000 deposited every year at the start of the financial year at 8.2%, compounded yearly (para 5).

On a ten-year account the difference between the SSY’s no-penalty compassionate closure and a PPF-style cut is ₹1,30,834. The one scheme where a legitimate emergency is genuinely cheap to use is the one where the money is being saved for someone who cannot touch it herself.

Death is separate and immediate — para 7(1), on production of a death certificate, balance plus interest to the date of death paid to the guardian, post-death period earning at the Post Office Savings Account rate (para 7(2)). No five-year wait on a death claim.

What the tax law does, and does not do, to any of this

Verified directly in the Income-tax Act, 2025 as amended by the Finance Act, 2026.

The deduction is section 123, capped at ₹1,50,000 — “the whole of the amount paid or deposited in the tax year, being the aggregate of the sums enumerated in Schedule XV, as does not exceed ₹150,000”. The old split into 80C, 80CCC and 80CCD(1) is gone. Section 153 separately carries the interest-on-deposits deduction at ₹10,000 for an individual or HUF, ₹50,000 for a senior citizen — that is not where PPF sits.

The interest exemption is section 11(1) with Schedule II, and the entries are not interchangeable. Sl. No. 11 covers “interest, premium on redemption or other payment on such securities, bonds, annuity certificates, savings certificates, other certificates issued by the Central Government and deposits”, conditioned on Central Government notification. SSY is not in that entry. It has its own — Schedule II Sl. No. 5 — “Any payment from any account opened as per the Sukanya Samriddhi Account Scheme, 2019”, conditions “Nil”. Sl. No. 11 is for PPF, NSC and KVP. Sl. Nos. 3 and 4 are provident funds and have nothing to do with any scheme here.

The premature-closure tax trap does not apply to these five. I read Schedule XV paragraph 4 (payments whose deduction is disallowed and earlier deductions clawed back as deemed income) and paragraph 5 (receipts taxed on receipt) in full. Para 4 lists insurance premiums, ULIP contributions, house property and equity shares. Para 5 lists Senior Citizens’ Savings Scheme deposits, five-year Post Office Time Deposits, annuity plans and pension schemes. PPF, NSC, KVP, MIS and SSY appear in neither. So closing any of these five early does not make the amount taxable as deemed income and does not reverse your section 123 deduction for the years you claimed it.

That is the opposite of the Senior Citizens’ Savings Scheme treatment, and it is the most useful thing on this page. For SCSS the tax is a separate and often larger charge — which is why scss-premature-withdrawal-penalty/ exists, and why I have not restated it here.

Two caveats. I am reading the Act as amended, and whether your adviser applies the same reading to an account opened under the 1961 Act is their call — though the repeal does not disturb tax years before 1 April 2026. And a CA should still see your own numbers; this is education, not advice.

The cost nobody puts on the form

Every table above prices the deduction. None prices the thing that is usually larger — the interest you stop earning because your money is now in a 4% savings account.

₹20,00,000 out of a scheme at 7.1% and parked at 4% leaves you ₹62,000 worse off after one year and ₹3,84,930 worse off after five. Nobody deducts that. It is not a penalty, it is not on any form, and it is not in any table — it is the amount you never earned. It scales with your balance and with how long the money stays out, and it is why “close it and start again” is almost never the cheaper answer.

The honest summary

Rates are for Oct–Dec 2026, notified 30 September 2026, next revision 31 December 2026. They are a quarterly notification, not a promise — and several figures printed in the scheme bodies are older vintages than the rates above, which is the trap this page has walked into twice.

Three things to take away. Know which door you are knocking on — partial withdrawal costs nothing in PPF and does not exist in NSC, KVP or MIS. Get the scheme name right before you get the number, because the 1–2% figures circulating online blend four different penalties into one story and the counter will only ever apply one. And if your reason is a genuine emergency, check whether you need the money at all — an SSY compassionate closure carries no penalty, a PPF partial withdrawal carries no penalty, and both leave the account alive.

If you do need to close, know which column of which table applies to you, and take the passbook, the form for your scheme, and your reason’s paperwork in one visit.

Sources

Gazette notifications as served by the National Savings Institute, retrieved 2 October 2026: PPF Scheme 2019 G.S.R. 915(E)/290(E)/831(E), paras 7, 10, 12(4), 13, 15; NSC (VIII Issue) Scheme 2019 G.S.R. 919(E)/284(E), paras 5(2A), 5(3), 7(1)–(4), 9; KVP Scheme 2019 G.S.R. 920(E), as amended by G.S.R. 283(E) (Table-2), G.S.R. 837(E) of 22.11.2022 (5(1A) as substituted, 5(1B), Table-3), G.S.R. 52(E) of 27.01.2023 (5(1B) as substituted, 5(1D), Table-4) and G.S.R. 324(E) of 27.04.2023 (5(1E), Table-5) — paras 5(1A)–(1E), 6(1)–(3); MIS Scheme 2019 G.S.R. 917(E)/286(E), paras 5(1A), 5(2), 5(3), 6, 7; SSY Account Scheme 2019 G.S.R. 914(E)/288(E), paras 5(1A), 7(1)–(3), 8(1)–(3), 9(2). Rescission G.S.R. 912(E)/913(E) of 12.12.2019. Rates OM F.No.1/4/2019-NS dated 30.09.2026, circulated as SB Order 12/2026. Income-tax Act 2025 as amended by the Finance Act 2026 — s.11(1), s.123, s.153, Schedule II (Sl. 5, 11), Schedule XV (paras 4, 5).

Every rupee figure above is produced by closure_math.py, which carries an assert-based self-check covering the PPF lower-of-two ceiling, the annuity-due model, the KVP and NSC gazette bands and the 115-month maturity, the MIS split, the NSC rate tension, and the shape of every series. self_check: ok.

Still open, and it is the one thing no source can close: what the counter actually asks for. No scheme or Form text supplies that — they name the grounds and the documents the notification lists, which is what this page reports. The POSB Manual would, and I could not reach an authoritative copy. Treat the documentation list as scheme-mandated, not counter-mandated, and confirm the rest with your branch.

The wider picture

Rates and rules for all six post office and bank savings schemes in one place: Small savings schemes in India: rates, rules, tax. Working out what to do with the money afterwards: loan against PPF or PMJJBY. Post office interest and TDS: how post office interest is taxed and exempted.

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