Investment in PPF (Public Provident Fund) Account is a favorite tax saving investment option for Indian tax payers in view of the following :
But for the long maturity period of 15 years, PPF is the best available option for tax saving. PPF accounts can be opened at designated branches of authorised banks and designated Post Offices.
Any resident individual in his / her name or in minor's name in the capacity of guardian of the minor by submitting application on Form A. Only one PPF account can be opened in one name. Either father or mother can open a PPF account in the name of a minor child, but not both.
HUFs are not permitted to open PPF account w.e.f. 13.05.2005. however, accounts already opened shall continue till maturity and deposits can be made till maturity. No extension is allowed in HUF cases.
A non-resident cannot open a PPF account. If a resident who opened an account under this scheme, subsequently becomes a non-resident during the currency of the maturity period, the account shall be deemed to be closed with effect from the day he becomes a non-resident and interest with effect from that date shall be paid at the rate applicable to the Post Office Saving Account up to the last day of the month preceding the month in which the account is actually closed.
PPF accounts can be opened at at designated branches of State Bank of India and other authorised banks, all Head Post Offices and other designated Post Offices.
The account can be opened with a minimum subscription of ₹ 100/-. However, ₹ 500/- per annum is required to be deposited.
The accounts in which deposits are not made for any reason are treated as discontinued accounts and such accounts cannot be closed before maturity.
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.
The maximum amount limit is ₹ 1.50 lacs per annum. The amount can be depoosited in lump-sum or in convenient instalments not exceeding 12 in a year. The instalment are to be in multiples of ₹ 5/-.
The limit of ₹ 1,50,000 for deposits in a year shall apply to to an individual's self account andaccounts of his minor children, all combined. However, there will be separate limit for HUF and spouse.
The amount deposited in excess of Rs, 1,50,000 in a year will not be treated as subscription and shall be returned without any interest.
The subscriptions can be made in cash or by crossed cheque or draft or pay order or by electronic mode. In case of deposit by local cheque/demand draft, the date of realisation is treated as the date of date of deposit.
A PPF accunt matures after expiry of 15 years from the close of financial year in which the account was opened. The entire balance can be withdrawn in full on maturity of PPF account.
On maturity of a PPF account, it can be extended for a further period of five years at a time by submitting an application on Form H, or as near thereto as possible. The facility can again be availed on expiry of 20 years, 25years and so on. The option should be exercised within a period of one year after expiry of 15 years or the extended block of 5 years.
The interest is paid as per the rates declared by the Government from time to time. The PPF interest Rates have been as under since 1st April 1986:
|Period||Interest Rate||Period||Interest Rate|
|01.04.1986 to 14.01.2000||12.00%||15.01.2000 to 28.02.2001||11.00%|
|01.03.2001 to 28.02.2002||9.50%||01.03.2002 to 28.02.2003||9.00%|
|01.03.2003 to 30.11.2011||8.00%||01.12.2011 to 31.03.2012||8.60%|
|01.04.2012 to 31.03.2013||8.80%||01.04.2013 to 31.03.2016||8.70%|
|01.04.2016 to 30.09.2016||8.10%||01.10.2016 to 31.03.2017||8.00%|
|01.12.2011 to 31.03.2012||8.60%||01.01.2018 to 30.09.2018||7.60%|
|01.04.2012 to 31.03.2013||8.80%||01.10.2018 onwards||8.00%|
The interest is compounded annually.
The interest for the month is calculated on the minimum balance available in the account from 5th of a month to the last date of the month.
Application on Form E, or as near thereto as possible, is required to be submitted for Nomination in PPF account.
The nomination can be cancelled or changed or amended by submitting an application on form F, or as near thereto as possible.
A PPF account can be transferred from a branch of State Bank of India or a nationalized bank to Post Office and vice versa and also from a branch of State Bank of India to a designated branch of Nationalized Bank.
A PPF account cannot be transferred from one person to another. Even in the case of death of a depositor, the nominee cannot continue the account.
A depositor can avail of loan facility any time after expiry of one year from the end of the year in which the initial subscription was made but before expiry of five years from the end of the year in which the initial subscription was made i.e. the loan facility is available from third to sixth financial year of opening the account.
Application in prescribed form ( Form D, or as near thereto as possible ) is to be made for loan along with the pass book of the account.
The loan can be taken up to 25% of the amount in the account at the end of the second year immediately preceding the year in which the loan is applied for.
In case, the loan is sought from minor's Account, the guardian has to make a declaration that the money is required for the use/benefit of the minor.
The loan is repayable in lump sum or convenient installments. Where loan is repaid within 36 months, interest is charged at 1% (2% w.e.f. 1st December 2011) and if it is not repaid within 36 months, the interest at the rate of 6% is charged on the outstanding balance. The interest is to be paid in not more than two installments after the loan amount is fully repaid.
Once the first loan is repaid, second loan can be obtained on same terms.
A depositor can make partial withdrawals, once every year from his PPF account after expiry of five years from the end of Financial Year in which the initial deposit was made i.e. withdrawal from PPF account is available from seventh year.
The amount of withdrawal is restricted to 50% of the credit balance at the end of the fourth year immediately preceding the year of withdrawal or the year immediately preceding the year of withdrawal, whichever is lower.
Application in prescribed form ( Form C, or as near thereto as possible ) is to be made for withdrawal along with the pass book of the account.
In case, the withdrawal is sought from minor's Account, the guardian has to make a declaration that the money is required for the use/benefit of the minor.
In case of accounts extended beyond Maturity period partial withdrawals are allowed once in a year with the condition that the amount of withdrawal during a five year block period should not exceed 60% of the balance in the account at the commencement of the block period.
Premature closure of a PPF Account is permissible in following cases:
Provided that such premature closure shall be allowed only after the account has completed five financial years.
Any time after the expiry of 15 years from the end of the year in which the initial subscription was made by him, a subscriber may, if he so desires, apply in Form C, or as near thereto as possible, together with his pass book for the withdrawal of the entire balance standing to his credit. The account holder will be allowed of the entire balance (together with interest up to the last day of the month preceding the month in which the application for withdrawals made) after making adjustments, if any, in respect of any interest due from the subscriber on loans taken by him and close his account.
On the expiry of 15 years from the end of the year in which the initial subscription was made but before then expiry of one year thereafter, an account holder may exercise an option Form H, or as near thereto as possible, that he would continue to subscribe for a further block period of 5 years according to the limits of subscription.
In the event of an account holder opting to subscribe for the aforesaid block period he shall be eligible to make partial withdrawals not exceeding one every year by applying on Form C, or as near thereto as possible, subject to the condition that the total of the withdrawals, during the 5 year block period, shall not exceed 60 percent of the balance at his credit at the commencement of the said period.
If an account holder fails to submit application for extension of account on form H within one year of the maturity of the account, the account will get extended by default and the balance in the account shall continue to earn interest but the account holder will not be able to make investments / deposits in the account. He will only be able to make withdrawals from the account.
Available under Section 80C on deposits made in the account(s) during the year.
Interest income is totally tax free.
The benefits of exemption of interest from Income Tax is not available on deposits made in a PPF account after expiry of fifteen years without exercising option in writing for continuance of the account within one year.
Only local cheques are accepted for deposit. The date of realisation of local cheque and demand draft is treated as date of deposit in the Account.
Balance in PPF account cannot be attached under court decree.
Entire deposit in a PPF account is exempt from the Wealth Tax.
The deposit in a minor's account is clubbed with the deposit of the account of the guardian for the limit of Rs.70,000/- (1,00,000/- w.e.f. 1st December 2011).
On death of the account holder, his nominee(s) / legal heir(s) cannot continue the account. The balance in the account will be paid on demand to his legal heirs / nominee. However, the undrawn balance shall continue to earn interest till the end of month preceding the month in which the amount is paid to the legal heir(s)/nominee.
Discontinued w.e.f. 1st December 2011.
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