Public Provident Fund

Public Provident fund (PPF) ranks as one of the most attractive small saving schemes. It is popularly known as Savings-cum-tax saving account. This scheme is introduced by Central government in 1968.It is also served as retirement planning tool for many of those who do not have any structured pension plan covering them.

Features of Public Provident Fund:

• Interest rate of 7.9% per annum w.e.f August 2019
• The contribution to the account can vary year on year , from a minimum deposit  500/- per annum to Maximum deposit is Rs 1,50,000/- per annum. Investments in PPF account can be made either in lump sum or in installments (not exceeding 12 in a year).
• The scheme is for 15 years, which can be further extended in blocks of 5 years each for any number of blocks.
• Non-Resident Indians (NRIs) are not eligible to open PPF account.
• Free from court attachments
• An individual cannot invest on behalf of HUF (Hindu undivided family) or Association of persons. The PPF account can be opened in a Head post office, or in branch of SBI or its subsidiaries and also at specified branches of some other nationalized banks.
• It is an ideal option for both salaried as well as self employed classes.

 

Mode of payment:

Every subscription shall be made in cash or through crossed cheque or draft or postal order, in favor of the accounts office, at the place at which that office is situated.

Loan facility:

Loan can be availed any time between 3^rd to 6th financial years, Up to 25% of the available amount. Every loan has a repayment period of 36 months. The account should be an active account and no past loan should be due.

Withdrawals:

1. On maturity i.e. after 15 years- Full amount can be withdrawn

2. Partial withdrawal i.e. after 5 years- Only one partial withdrawal is allowed per financial year.

• The maximum amount that can be withdrawn per financial year is the lower of following :

1. 50% of the account balance as at the end of the financial year, preceding the current year, or
2. 50% of the account balance as at the end of the 4th financial year, preceding the current year.

3. Premature closure i.e. after 5 years – Allowed only in case of Medical or Education grounds, and can withdraw full amount.

4. Withdrawal after extension: balance of amount in the account can be withdrawn. In addition, only one withdrawal can be made per year.

Tax Benefit:

Investment up to Rs 1, 50,000/- per annum qualifies Income tax deduction under section 80C and also interest is exempt from income tax. No TDS on interest. There is no tax on partial/premature withdrawals from the PPF account

Defaults and revival:

If the PPF account-holder fails to deposit the minimum Rs 500 in  a  given financial year, the account is considered  as discontinued  but  the  interest  will  continue  to  accrue  and paid at the end of the term. The default can be got regularized on payment of a fee of Rs 50 for each year of default, along with the arrears of subscription of Rs 500 for each such year.