What is PPF?
Public Provident Fund (PPF) is a government saving scheme introduced in 1968 by the National Savings Institute of the Ministry of Finance. The main aim of this scheme was to provide a reasonable return on the investment made by individual along with tax benefits. This scheme is fully in control with the central government.
What are the features of PPF account?
· An attractive interest rate of 7.1%, more than any other fixed investment scheme.
· It is a long-term reliable investment scheme for 15 years.
· LOAN facility can be availed.
· Partial withdrawal facility is available after 7th year.
· Interest is tax free.
· The deposit into a PPF account can be done by any means, by way of cash, cheque, Demand Draft or through an online fund transfer.
· After completion of 15 years it can be extended up to another 5 years.
· Interest received is tax free.
· The entire balance can be withdrawn on maturity.
· Nomination facility is also available to the account.
Who is Eligible to open PPF account?
· Any individual who is resident of India can open the account.
· Minors are also eligible to open the account with valid age proof.
· Only one PPF account is allowed per person.
· NRIs are not allowed to open their new PPF account however they can continue their existing PPF account opened before leaving India up to 15 years.
Where to open the PPF account?
PPF account can be opened at any bank branch authorized by the government of India.
It can also be opened at selected Indian Post office branches.
(you can visit any bank branch or Post office in your city to open the PPF account related query)
What are the documents needed to open the PPF account?
1. You need one valid identity proof and one address proof from the list of below documents to open the account.
List of documents:
· PAN card
· Voter ID card
· AADHAR card
· Passport
· Driving License
· Ration card
· Electricity bill
· Water bill
· Telephone bill
2. Two latest passport size photograph showing picture clearly visible.
3. Pay-in-slip or bank cheque in favour of PPF account to transfer the amount from the bank account. (You can deposit the money directly in to the PPF account also, after it is opened)
4. For minors valid Age proof is mandatory.
What is the minimum and maximum deposit to PPF account? What will happen if investment made more than maximum limit.
PPF account can be opened at a minimum balance of Rs 100 only however you have to maintain the minimum balance.
Minimum investment annually = Rs 500
Maximum investment annually = 1.5 lakhs
The amount can be invested monthly, quarterly, half yearly or annually. The amount invested above the maximum limit will not earn interest and also not eligible for tax saving.
What will happen if the minimum amount is not deposited into the PPF account?
The PPF account will be deactivated, if the minimum annual contribution is not made to the account. To activate such account, you have to pay the penalty of Rs 50 for each inactive year and also you have to deposit the minimum contribution of Rs 500 to the account for each inactive year
When we can withdraw money from PPF account?
PPF account can only be closed after 15 years of maturity. The entire amount present in the PPF account can be directly transferred to the saving bank account with the interest and it can be closed. However, there is partial withdrawal facility is also available after completion of 6th year or 7th year onward. If the account holder is in need, he can withdraw 50% of the amount held up the end of 4th year (preceding year or the end of immediately preceding year whichever is lower).
What are the tax benefits with the PPF account?
Annual contributions qualify for tax deduction under Section 80C of income tax. The tax benefit is capped at ₹1.5 lacs per financial year.
PPF falls under EEE (Exempt,Exempt,Exempt) tax basket. Contribution to PPF account is eligible for tax benefit under Section 80C of the Income Tax Act. Interest earned is exempt from income tax and maturity proceeds are also exempt from tax.
What are the conditions for premature closure of PPF account?
Premature closure is only available after the completion of 5 years with 1% penalty. This is only allowed in case of the medical treatment of any family member or for the purpose of the higher studies of the account holder.
Can I transfer my PPF account?
PPF account can be transferred to any other branch, any bank or post office on the request of the account holder. For this process, he needs to visit the existing branch having PPF account and ask for the transfer to the desired branch.
You need to fill up some transfer farm at the branch and the existing branch will transfer all the amount in the form of a cheque to the new branch with all the details of the customer.
After the new branch will receive your documents, you need to go to the branch to fill up new account opening form (you can submit new nominee also).
Now, wait for the process to complete and your new PPF account will be opened up in a couple of days.
How to link your saving bank account with the PPF account?
If you are having your saving bank account and PPF account in the same branch then you can link both the account. This helps you to transfer the amount to the PPF account with a single click and helps to track the investment made in your PPF account. If the account is not linked by itself you need to visit the branch and ask for linking your saving and PPF accounts. Bank will give you a form to fill up and the account will be linked.
What will happen to the PPF account in case of sudden death of the PPF account holder?
In case of sudden death of the account holder the amount present will be given to the nominee or legal heir after 15 years. Nominee or legal heirs are not eligible to maintain the account of the deceased.
If the deceased account holder having balance of 1.5 lakh or more, then to claim such amount nominee or legal heir has to present the valid identity proof.
How to get the maximum benefit from the PPF account?
To get the maximum benefit, one should make investment before 5th of every month in case of monthly investment and same should be followed for the consecutive month. For lumpsum investment you have to invest before 5th April. This is because interest is calculated monthly on the minimum balance present in the account between 5th and last date of month and it is credited in to the account on 31st march in every year. By making investment before 5th you will get the interest of the same month.
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