What
Is PPF?
PPF
stands for Public Provident Fund.
PPF
is a savings scheme established by the Central Government of India.
It
is a safe, tax deductible investment with attractive returns that are fully
exempted from Income Tax. It is a long-term savings scheme.
Features
1.
Safe investment
2.
Guaranteed
returns
3.
Backed by
Central Government
4.
Attractive Tax
benefits
5.
Long term
savings scheme
6.
Account can't
be attached to any claim in case of debt or liability. So, the money is yours
Income
Tax Benefits
Effective
01-Apr-2020, the income tax benefits will depend upon whether you choose old
tax system or new tax system.
Old
Tax System:
Deposit
amounts up to Rs.1,50,000 in a financial year qualify for tax deduction under
Section 80C of Income Tax Act.
Interest
earned and withdrawals are completely tax free.
Maturity amount is tax free.
The amount in PPF is totally exempt from wealth tax.
New
Tax System:
No
income tax benefits. The deposit amount won't get any deduction benefit under
Section 80C of Income Tax Act
Interest
earned and withdrawals are completely tax free.
Maturity amount is tax free.
The amount in PPF is totally exempt from wealth tax.
Eligibility
An
individual who is a resident of India can open a PPF account for himself.
Also,
he can open another PPF account on behalf of a minor child or a person of
unsound mind of whom he is the guardian.
Minor will operate the account himself when he becomes major.
Individual can have only one PPF account under his name either in Post Office
or Bank.
No joint account is allowed.
Individuals having General Provident Fund or Employee Provident Fund can also
open a PPF account.
NRI
NRI
(Non-Resident Indian) are not eligible to open a new PPF account.
But,
if a resident having a PPF account becomes NRI, then he can choose one of the
following two options.
1.
He can continue
the account till maturity on a non-repatriation basis. No extension is allowed
after maturity
2.
He can
pre-maturely close the account subject to certain conditions. Please
check Pre-mature Closure section for more details
HUF
Effective
13-May-2005, HUF (Hindu Undivided Family) member can't open a new PPF account.
Account
opened before 13-May-2005 can be continued till maturity.
But
the account can't be extended after 13-May-2005.
Where
To Open the Account?
PPF
account can be opened at
1.
State Bank of
India or its Associates
2.
Head Post
Office
3.
Any
Nationalized banks
4.
Some Private
sector banks
Deposit
Amount
Minimum
deposit required per financial year is Rs. 500.
Maximum
deposit allowed per financial year is Rs. 1.5 Lakhs.
Deposit
amount should be in multiples of Rs. 50.
Deposits
can be made in one lump sum or in instalments in a financial year.
There
is no limit on the number of instalments in a month or financial year. They can
be anytime during the financial year.
The
maximum deposit limit is for both individual self-account and account of minor
of whom he is the guardian, taken together.
Best Time to Deposit
With
PPF, remember the financial year (1st April to 31st March)
concept for deposits.
Amount
deposited at the beginning of the financial year earns more interest than the
amount deposited towards the end of the financial year.
·
If you are
planning to deposit yearly, then 1st to 5th of
April
·
If you are
planning to deposit monthly, then 1st to 5th of
every month
·
If you are
planning to deposit quarterly, then 1st to 5th of
April, July, October & January
·
If you are
planning to deposit half-yearly, then 1st to 5th of
April & October
In-Active
Accounts
PPF
account will become in-active if you don't deposit the minimum amount during
any financial year.
You
can re-activate the account by paying a penalty of Rs. 50 for each financial
year of default and the minimum deposit amount of Rs. 500 for each financial
year of default.
Even
if you don't re-activate, the in-active account will continue to earn interest
as per the interest rate applicable to scheme from time to time till maturity.
The
in-active accounts won't qualify for loan or partial withdrawals.
If
the account becomes in-active, then you are not allowed to open another PPF
account till you close the in-active account after the maturity period.
Interest
Interest
is calculated at the end of every calendar month.
Monthly
interest is calculated on the lowest balance of the account between the close
of 5th day and the end of the month.
Interest
Rate (%)
The
current annual interest rate is 7.10%.
Annual
interest rate is not fixed, and it is determined by the Central Government from
time to time.
From
01-Apr-2016 onwards, interest rate for this scheme has been announced by the
Government on a quarterly basis. Note that this used to be on a yearly basis
earlier.
Compounding
Frequency
PPF
account compounds annually.
Interest
earned every month during the financial year will be credited to the account at
the end of the financial year (i.e., on 31st March).
Maturity
PPF
maturity period is 15 full financial years.
You
can withdraw the entire balance any time after the completion of 15 financial
years from the end of the financial year in which the account was opened.
PPF
account can be extended even after the maturity period.
The
extension can be with deposit or without deposit.
If
you want to extend, then you can do so before one year from the maturity
date.
Extension
Without Deposits
The
account holder can continue to withdraw every financial year.
One
withdrawal is allowed per financial year.
There
is no limit on the withdrawal amount.
The
amount remaining in the account will continue to earn interest (at the PPF
interest rate) till it is fully withdrawn.
Once
you choose to extend without deposits, you can't change the account to
"with deposits".
Extension
With Deposits
The
extension period can be for a block of 5 financial years. There is no limit on
the number of blocks.
The
deposit limits during the extension are same as that of the PPF account.
During
the extended period, one withdrawal is allowed per financial year.
The
total withdrawal limit during the extended 5-year block should not exceed 60%
of the account balance at the start of the extension period.
Loan
Loan
facility is available from 3rd financial year to 6th financial
year of opening the account.
You
are eligible for loan if your account is active. In-active accounts won't
qualify for loan.
The
eligible loan amount is 25% of the account balance at
the end of 2nd financial year immediately preceding the year in
which the loan is applied for.
The
loan principal amount should be re-paid within 3 years from the first day of
the month following the month in which the loan is sanctioned.
The
repayment of principal amount can be made in one lump sum or in a maximum of 36
monthly instalments.
Once
the principal amount is fully repaid, then the loan interest needs to be repaid
within 2 monthly instalments.
The
interest will be at the rate of 1% per annum above the
applicable PPF interest rate from the 1st day
of the month following the loan sanctioned to the last day of the month of last
instalment.
If
the loan principal is partly paid or not paid within the 3 years’ time, then
the outstanding loan principal amount will be charged at 6% per annum above the
applicable PPF interest rate from the 1st day of the month
following the loan sanctioned to the last day of the month in which the loan is
finally repaid.
You
are not allowed for another loan when you already have a loan, and it is not
fully repaid.
You
are eligible for only one loan in a financial
year even if you have already repaid your existing loan.
Withdrawal
Partial
withdrawal is allowed from the 7th financial year of opening
the account.
Only
one withdrawal is allowed per financial year.
You
are eligible for withdrawal if your account is active. In-active accounts won't
qualify for withdrawal.
Withdrawal
limit is 50% of the account balance standing at the end of 4th financial
year immediately preceding the financial year of withdrawal OR at the end of
preceding financial year, whichever is lower.
If
you had availed any loan, then the unpaid loan amount will be deducted from the
withdrawal amount.
Any
amount withdrawn is not repayable.
Pre-Mature
Closure
You
can close PPF account before Maturity. But this will be allowed in the
following genuine situations.
1.
Medical
treatment of life-threatening
disease to you, your spouse, dependent children or parents. You should produce
supporting documents and medical reports from the treating medical authority
2.
Yours or your
dependent children’s higher education. You should produce documents
and fee bills of admission in a recognized institute of higher education in
India or abroad
3.
If your residency
status changes. That is, if you become the Permanent Resident or Citizen of
another country. You should produce a copy of Passport and Visa or Income Tax
returns
This
pre-mature closure is allowed only for the accounts that has completed
5 financial years from the end of the financial year in which the
account was opened. It means that pre-mature closure is allowed from the 7th financial
year of account opening.
There
is a penalty for pre-mature closure of PPF account. If you
close the account pre-maturely, then the interest will be calculated at 1%
lesser than the interest rate applicable to the scheme from time to
time since the date of account opening.
For
example, if the interest rate for a quarter is 8.5%, then you will earn
interest for 7.5% only for that quarter.
Nomination
Nomination
facility is available under PPF scheme.
The
account holder can nominate one or more persons to receive the amount standing
to his credit in the event of his death.
Nomination
can't be made on the account opened on behalf of minor.
The
account holder can't nominate a trust as his nominee.
A
nomination made by the account holder can be cancelled or changed by a fresh
nomination.
If
the nominee is minor, then the account holder can appoint any person to receive
the amount in the event of his death during the minority of the nominee.
If
the nomination is not in force at the time of death of the account holder, then
the amount standing to his credit can be paid to the legal heirs of the
deceased.
Account
Transfer
PPF
account can be transferred from
·
one bank to
another bank
·
one post office
to another post office
·
one bank to
another post office and vice versa
PPF account can't be transferred from one person to another person.
Call Us Now 
Address
Email Us