Public Provident Fund is a popular savings cum
tax saving instrument in India.
Public Provident Fund
Public Provident Fund, popularly known as PPF, is a savings cum tax saving instrument. It also serves as a retirement planning tool for many of those who do not have any structured pension plan covering them. The balances in PPF account cannot be attached by any authority normally.
How to Open Account
Public Provident Fund account can be opened at designated post offices throughout the country and at designated branches of Public Sector Banks throughout the country.
Who can Open Account
The account can be opened by an individual in his own name, on behalf of a minor of whom he is a guardian.
Tabs on Investment
Minimum deposit required in a PPF account is Rs. 500 in a financial year. Maximum deposit limit is Rs. 70,000 in a financial year. Maximum number of deposits is twelve in a financial year.
Maturity
- The maturity period of the account is 15 years.
- Rate of interest is 8% compounded annually.
- One deposit with a minimum amount of Rs.500/- is mandatory in each financial year.
- The amount of deposit can be varied to suit the convenience of the account holders.
- The account holder can retain the account after maturity for any period without making any further deposits. In this case the account will continue to earn interest at normal rate as admissible till the account is closed.
- The account holder also has an option to extend the PPF account for any period in a block of 5 years at each time, after the maturity period of 15 years.
Lapse in Deposits
If deposits are not made in a PPF account in any financial year, the account will be treated as discontinued. The discontinued account can be activated by payment of the minimum deposit of Rs.500/- with default fee of Rs.50/- for each defaulted year.
Premature Closure or Withdrawl
- Premature closure of a PPF Account is not permissible except in case of death. Nominee/legal heir of PPF Account holder cannot continue the account after the death.
- Premature withdrawal is permissible in the 7th year of the account subject, to a limit of 50% of the amount at credit preceding three year balance. Thereafter one withdrawal in every year is permissible.
Account Transfer
The Account is transferable from one post Office / bank to another and from post Office to bank or from a bank to a post office.
Tax Benefits
- Deposits in PPF are eligible for rebate under section 80-C of Income Tax Act.
- The interest on deposits is totally tax free.
- Deposits are exempt from wealth tax.
