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.
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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.
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 limit of ₹ 1,50,000 for deposits in a year shall apply to to an individual's self account and accounts 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 deposit.
|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 cannot be transferred from one person to another. Even in the case of death of a depositor, the nominee cannot continue 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.
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.
Provided that such premature closure shall be allowed only after the account has completed five financial years.
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.
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.
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