The Public Provident Fund (PPF) can be opened by the following individuals:
(i) Any single adult who is a resident Indian can open a PPF account.
(ii) A guardian is permitted to open a PPF account on behalf of a minor or a person of unsound mind.
Please note that an individual can have only one PPF account across the country, whether it is opened at a Post Office or any Bank. This restriction ensures that individuals maintain only one PPF account to benefit from this savings scheme effectively.
Deposit features of the Public Provident Fund (PPF)
(i) Minimum Deposit: The minimum deposit required in a Financial Year (FY) is Rs. 500, ensuring accessibility to a wide range of investors.
(ii) Maximum Deposit: The maximum limit for deposits in a FY is Rs. 1.50 lakh, including both the deposits made in the account holder’s own account and the account opened on behalf of a minor.
(iii) Flexible Deposit Installments: Deposits can be made in any number of installments in a FY, in multiples of Rs. 50, with the maximum limit being Rs. 1.50 lakh. This offers flexibility to investors to make regular contributions based on their financial capacity.
(iv) Mode of Deposit: The account can be opened by cash or cheque. In the case of a cheque, the date of realization of the cheque in the government account shall be considered as the date of opening of the account or subsequent deposit.
(v) Tax Deductible: Deposits made in the PPF account qualify for deduction under section 80C of the Income Tax Act, allowing investors to avail tax benefits on their contributions.
By understanding these deposit features, individuals can make informed decisions about their PPF contributions and utilize the tax benefits while planning their financial goals effectively.
Discontinuation rules for the Public Provident Fund (PPF) account
(i) Minimum Deposit Requirement: If the minimum deposit of Rs. 500 is not made in any financial year, the PPF account will become discontinued.
(ii) Loan/Withdrawal Restriction: Discontinued accounts are not eligible for loan or withdrawal facilities until they are revived.
(iii) Account Revival: A discontinued account can be revived by the depositor before maturity by depositing the minimum subscription amount (i.e., Rs. 500) for the current year, along with a default fee of Rs. 50 for each defaulted year.
(iv) Inclusive Deposits: The total deposit in a year shall include the deposits made in respect of the defaulted years from previous financial years. This means that to revive the account, the depositor must fulfill the minimum deposit requirement for the current year and clear the default fee for each defaulted year.
By understanding these rules, depositors can take appropriate action to keep their PPF account active and enjoy the benefits offered by this long-term savings scheme.
Interest features of the Public Provident Fund (PPF) are as follows:
(i) Interest Rate: The interest rate on the PPF account shall be applicable as notified by the Ministry of Finance on a quarterly basis.
(ii) Interest Calculation: The interest shall be calculated for each calendar month on the lowest balance in the account between the close of the fifth day and the end of the month. This ensures that the interest is based on the actual monthly balance in the account.
(iii) Interest Crediting: The interest shall be credited to the account at the end of each Financial Year, providing annual growth to the investment.
(iv) Account Transfer Interest: If the account is transferred from one bank to another or from a bank to a post office (or vice versa), the interest shall be credited to the account at the end of each Financial Year where the account stands at the end of the FY.
(v) Tax-Free Earnings: The interest earned on the PPF account is tax-free under the Income Tax Act, making it a tax-efficient savings avenue for investors.
By considering these interest-related features, investors can make the most of their PPF account, enjoying tax-free earnings and steady growth on their savings over the long term.
Loan provisions for the Public Provident Fund (PPF) account
(i) Eligibility for Loan: A loan can be taken after one year from the end of the Financial Year (FY) in which the initial subscription was made. For example, if the account was opened during 2010-11, the loan can be taken in 2012-13.
(ii) Loan Duration: The loan can be taken before the expiry of five years from the end of the year in which the initial subscription was made.
(iii) Loan Amount: The loan amount can be up to 25% of the balance to the account holder’s credit at the end of the second year immediately preceding the year in which the loan is applied. For instance, if the loan is taken during 2012-13, 25% of the balance credit on 31.03.2011 will be available as a loan.
(iv) Frequency of Loans: Only one loan can be taken in a Financial Year, providing a structured approach to loan facilities.
(v) Second Loan Provision: A second loan shall not be provided until the first loan is repaid, ensuring responsible borrowing and repayment practices.
(vi) Loan Interest Rate – Early Repayment: If the loan is repaid within 36 months of the loan taken, the loan interest rate shall be 1% per annum.
(vii) Loan Interest Rate – After 36 Months: If the loan is repaid after 36 months of the loan taken, the loan interest rate shall be 6% per annum from the date of loan disbursement.
By understanding these loan provisions, account holders can make informed decisions about availing loans against their PPF account and manage their borrowings responsibly.
Withdrawal rules for the Public Provident Fund (PPF) account
(i) Withdrawal Frequency: A subscriber can make one withdrawal during a financial year after five years, excluding the year of account opening. For example, if the account was opened during 2010-11, the withdrawal can be made during or after 2016-17.
(ii) Withdrawal Amount: The amount of withdrawal can be up to 50% of the balance at the credit at the end of the 4th preceding year or at the end of the preceding year, whichever is lower. For instance, if the withdrawal is taken in 2016-17, it can be up to 50% of the balance as on 31.03.2013 or 31.03.2016, whichever amount is lower.
By understanding these withdrawal provisions, account holders can plan their withdrawals strategically, ensuring that they make the most of their PPF account while maintaining a stable financial position.
Premature closure and account closure on death rules for the Public Provident Fund (PPF)
(i) Premature closure shall be allowed after 5 years from the end of the year in which the account was opened, subject to specific conditions:
- In case of a life-threatening disease of the account holder, spouse, or dependent children.
- In case of higher education of the account holder or dependent children.
- In case of a change of resident status of the account holder (i.e., becoming an NRI).
(ii) Deduction of Interest: At the time of premature closure, 1% interest shall be deducted from the date of account opening or date of extension, as the case may be.
(iii) Closing Procedure: The account can be closed under the above conditions by submitting the prescribed form along with the passbook at the concerned Post Office.
Account Closure on Death:
(i) In case of the death of the account holder, the account shall be closed, and the nominee or legal heir(s) shall not be allowed to continue deposits in the account.
(ii) Interest Payment: At the time of closure due to death, the PPF rate of interest shall be paid until the end of the preceding month in which the account is closed.
By understanding these closure rules, account holders and their nominees can take appropriate actions in various circumstances and manage the PPF account accordingly.
Interest features and deposit rules for the 15-year Public Provident Fund (PPF) account
From 01.07.2023, the interest rate for the 15-year PPF account is 7.1% per annum, compounded yearly. This ensures that the account earns interest on the principal amount, which is compounded annually.
Minimum and Maximum Amount:
The minimum amount required to open a 15-year PPF account is INR 500. Investors can deposit up to a maximum of INR 1,50,000 in a financial year, ensuring accessibility to a wide range of individuals based on their financial capacity.
Deposits in the 15-year PPF account can be made in lump-sum or in installments, providing flexibility to investors to contribute either in one go or in multiple payments as per their convenience.
By understanding these interest and deposit features, individuals can open a 15-year PPF account and make regular contributions to build a stable and tax-efficient long-term savings avenue.
FAQs (Frequently Asked Questions)
Q1: What is the minimum amount required to open a 15-year PPF account?
A: The minimum amount required to open a 15-year PPF account is INR 500.
Q2: What is the maximum amount that can be deposited in a 15-year PPF account in a financial year?
A: The maximum amount that can be deposited in a 15-year PPF account in a financial year is INR 1,50,000.
Q3: Can deposits be made in installments in the 15-year PPF account?
A: Yes, deposits can be made in lump-sum or in installments as per the investor’s preference and convenience.
The interest rate of 7.1% per annum, compounded yearly, ensures steady growth of savings over the extended period. Deposits can be made in lump-sum or installments, providing flexibility to account holders.
By availing the PPF account, individuals can benefit from the compounding effect of interest and enjoy tax-free returns on their investments. It serves as an attractive option for long-term planning, retirement savings, and meeting financial goals. Regular contributions to the PPF account can create a substantial corpus, making it a prudent choice for building wealth and financial stability in the future.
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