Despite falling interest rates, PPF (public provident fund) remains one of the popular small savings schemes. Interest rate on PPF and other small savings scheme are being reset every quarter from April last year, as compared to the annual mode earlier. Investors in PPF currently get an interest rate of 7.8 per cent. The interest rate on PPF and other small savings schemes are benchmarked to yields on government bonds, with a small mark-up. In terms of tax implications, PPF enjoys EEE or exempt, exempt, exempt status - contribution, interest and maturity proceeds all are tax free.
10 Things To Know About PPF Rules
1) Only one PPF account can be maintained by an individual, except an account that is opened on behalf of a minor. Joint accounts cannot be opened.
2) A subscriber can open account on behalf of a minor but subject to maximum yearly contribution limit of Rs. 1.5 lakh in all the accounts.
3) Rs. 100 is the minimum amount needed to open a PPF account, according to India Post’s website.
4) The minimum deposit in a PPF account in a financial year is Rs. 500 and maximum is Rs. 1.5 lakh. A penalty of Rs. 50 is levied per year for default, if the customer does not deposit the minimum amount of Rs. 500 in a financial year. PPF deposits can be done maximum in 12 transactions in a financial year.
5) The maturity period of PPF account is 15 years but can be extended within one year of maturity for further 5 years and so on. An account can be transferred from one authorised bank or post office to another. In such case, the PPF account will be considered as a continuing account.
6) If PPF subscribers fail to subscribe the minimum amount Rs. 500 in a financial year, the account will be treated as discontinued. The subscriber in such cases will not be entitled to obtain a loan or make a partial withdrawal unless the account is revived. The subscriber cannot open another PPF account in addition to the discontinued one.
7) A PPF subscriber can revive the discontinued account by payment of Rs. 50/- as penalty for each year of default along with arrear subscription of Rs. 500 for each year.
8) The PPF depositor is eligible for a loan in the third financial year of account opening. Loan up to 25 per cent of the balance amount at the end of first financial year can be availed. The rate of interest on the loan shall be at 2 per cent per annum above the PPF interest rate. The loan is repayable in 36 months.
9) Partial withdrawal is permissible every year from 7th financial year from the year of opening account, according to India Post’s website. The maximum amount is limited to 50 per cent of the balance at the end of the fourth year immediately preceding the year of withdrawal or the amount at the end of the preceding year, whichever is lower.
10) Premature closure is allowed only after the account has completed five financial years and under specific conditions like expenditure towards medical treatment, according to an amendment in 2016. “A subscriber shall be allowed premature closure of his account or account of a minor of whom he is the guardian on ground that amount is required for treatment of serious ailments or life-threatening diseases of the account holder, spouse or dependent children on production of supporting documents from competent medical authority,” the Finance Ministry said in a notification.