PPF account (Public Provident Fund) is a saving cum tax saving scheme offered by government of India .
It is just like a saving account, the only difference is that PPF account has a lock in period of 15 years and gives higher rate of interest than the saving account. It can be opened at any bank or post office. Rate of interest on PPF account is decided by government of India.
Eligibility for PPF account
Who can open?
Any individual who is an Indian citizen.
Account can also be opened in the name of minor having father or mother as the guardian. However if father or mother of the minor is not alive, grandfather or grandmother can be the guardian of the PPF account of the minor.
Only one account is allowed per individual. If two or more accounts are opened under one name, then other accounts will be treated as irregular accounts and no interest will be paid on it.
When the minor attains 18 years of age, he/ she can now operate his/her own account providing that he/she should submit revised account opening application to the concerned bank/post of with his/her signature attested by guardian or any respectable person known to bank.
Who can not open ?
Non Resident Indians.
Juristic persons viz. Trusts, HUF, Provident Funds etc.
Account cannot be opened under joint names.
The account can not be transfered from one person to another.
Rate of interest on PPF account
Ministry of Finance decides the Rate of Interest on quarterly basis.
Current ROI is 7.1% (As of July 2022).
Interest gets credited on 31st march of every year.
Interest is calculated on the minimum balance of the account during 5th and last day of the month.
Tenure
Tenure for PPF account is 15 years, however, one can withdraw money after completion of 5 years.
Maturity
After the maturity its tenure can be extended for one or more blocks of 5 years. The account can be extended for any number of times.
If one wants to extend the period of the account, it should be notified to the concerned organisation within 1 year of maturity otherwise the amount in the ppf account will not earn any interest after maturity.
Tax Benefits
The interest earned on PPF account is totally exempted from Tax under sec 80C of Income Tax act.
Both interest and maturity amount are exempted from tax.
Minimum and Maximum Investment
Minimum investment of at least 500Rs is to be made once in a year.
Maximum 1.5 lakh per year can be invested in PPF account.
One can invest lump-sum money or can invest in installments however only up to twelve instalments are allowed in a year and not more than that.
PPF Loan
One can avail personal loan against PPF amount.
One can withdraw Maximum 25% of the amount for a period of 36 months.
Also Loan facility is available from 3rd to 6th year of the PPF account.
ROI on PPF loan is as low as 1% if the loan is repaid before 36 months and is charged at 6% if the repayment is done after 36 months.
Revival of Dormant PPF account
The account gets dormant when the subscriber fails to invest minimum amount in the following years. However dormant can be revived using following procedure :
- By writing an application to the concerned bank or post office to revive the dormant account.
- One has to pay penalty of Rs.50 per year in addition to the minimum subscription of Rs.500.
How much money can be withdrawn from the PPF account?
- One can withdraw money after the completion of 5yrs.
- Only one withdrawal is allowed per year and only upto 50% of the amount can be withdrawn
Very useful information
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