Public Provident Fund (PPF) Scheme
Public Provident Fund Scheme Is a scheme govern under the said Act 1968 by the central Government.Scheme is a safe product, And tax beneficial investment, which has low risk, Individuals (residents) are eligible to open their account under the Public Provident Fund scheme. Accounts may also be opened under the name of a minor by his/her legal guardian. Each person can not open more than one account under his/her name. Form A is required to be filled up for opening a this account. Online facility for the same is also available.Non-resident Indians (NRIs) are ineligible to open an account under the Public Provident Fund Scheme. But can continue their existing accounts till its maturity.
No extension is possible. However, a resident who becomes an NRI during the 5 year tenure, may continue to subscribe to the fund until its maturity on a non-repatriation basis. Contributions to PPF are tax deductible for salaried individual in India. Premature closure of account is not allowed. One cannot open an account in the name of a minor. If done so, it is considered to be his/her PPF account.
Funds can be transferred via CASH or NRO Account to the PPF account.
Ideal investment option for both salaried as well as self employed classes.
Loan facility available from 3rd financial year up to 5th financial year.
Withdrawal permitted from 6th financial year.
Free from court attachment.
An individual cannot invest on behalf of HUF (Hindu Undivided Family) or Association of person.
Investors can subscribe to this scheme through Post Office or through banks appointed by Government. To open a PPF account, investor has to visit any of the banks/Post Office and submit account opening form and other documents
A minimum yearly deposit of Rs. 500 is required to open and maintain a PPF account.
Maximum Investment – A maximum deposit of Rs.100000 can be made in a PPF account in any given financial year, any amount greater than 100000 is not eligible for deduction under section 80 C. The Maximum Investment limit in PPF was earlier 70000 but has been changed to 100000 wef from 1/12/2011
The investments can be either in multiples of Rs 500, either in aggregate, or in installments (not exceeding 12 in a year, though more than one deposit can be made in a month).
The credit to the PPF account is made on the date of clearance of the cheque.
If one fails to make a deposit in any given year, penalty of 500 Rs is charged and one can make deposits for previous year. But will not get any returns for the past year.
Every subscription should be made in cash or through a crossed cheque or draft or postal order, in favour of the accounts office, at the place at which that office is situated.
It is also possible to transfer funds online using net banking to the PPF account.
The government of India decides the rate of interest for PPF account. Interest is calculated on the lowest balance between the close of the fifth day and the last day of every month. The minimum tenure of the PPF account is 15 years, which can be further extended in blocks of 5 years each for any number of blocks.
The entire amount can be withdrawn on maturity. Interest received is tax free.
The interest is compounded. All the balance that accumulates over time is exempt from wealth tax. Even though loan and withdrawal facility is available but conditions therewith make it less liquid. It is suitable for investors who are risk averse.
FEATURES OF PPF.
But if found to be having more than one account then the second account will be deactivated. You will receive only principal amount.
PPF account cannot have a joint holding.
In case death of account holder the balance amount will be paid to the nominee so appointed or legal heir even before 15 years. So nominees or legal heirs are ineligible to continue with the PPF account of the deceased. If balance amount is more than Rs.100,000 then deceased nominee or legal heir have to prove their identity to claim the amount.
PPF can be transferred from one place to another or among the PPF service providing institutions. But can’t be transferred from one person to another.
There is a lock-in period of 15 years and the money can be withdrawn in whole after the lock in is over which is tax free. However, pre-mature withdrawals can be made from the end of the sixth financial year. The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of 4th year preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.
If the minimum amount in any year is not invested then the account will be deactivated. To activate one needs to pay Rs.50 as penalty for each inactive year also would need to pay Rs.500 for each inactive year’s contribution.
Interest earned is fully exempt from tax. Contributions to PPF accounts of the spouse and children are also eligible for tax deduction. Income Tax authorities can attach the account for recovering tax dues. Tax bracket for PPF is EEE (i.e. Exempt, Exempt, Exempt). So contribution is exempted under 80C, Interest earned is tax exempted and withdrawal is also exempt from tax.
After maturity investor may either withdraw the accumulated balance and close the account or extend his PPF account, extension can be taken in a block period of 5 years for any number of times. As per terms and conditions prescribed by Government, an investor can avail of loan and withdrawal facility
SOME IMPORTANT TIPS
1. Can changes be made to nominations?
Yes, changes to previous nomination(s) are possible by applying for fresh nomination(s) in Form F.
Can a PPF account be transferred?
Yes, a PPF account can be transferred from one account office to another.
Is Partial Withdrawal allowed from a Minor’s Account?
Withdrawals from a minor’s account requires the guardian to furnish a certificate in the following form:
“Certified that the amount sought to be withdrawn is required for the use of who is alive and is still a minor.