What is PPF ?
PPF schemes are very popular among investors. The National
Savings Institute established the Public
Provident Fund PPF Scheme in 1968. The Indian government supports this
scheme. As a result, the returns are guaranteed. Section 80C of the Income Tax
Act exempts the investment and interest earned from the PPF scheme. As a
result, this scheme is one of India’s most popular tax-saving and money-saving
schemes.
What is the Eligibility for PPF accounts?
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A PPF account can be opened by any resident Indian.
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An investor, however, can only have one account in
their name and cannot open a second account on behalf of a minor.
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Furthermore, a PPF account cannot be opened jointly. It
can only be held in one person’s name.
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In addition, Hindu Undivided Families (HUFs) and
Non-Resident Indians (NRIs) are not eligible to open a PPF account.
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NRIs, on the other hand, opened PPF accounts as resident
Indians and can continue to operate them until maturity. They will not,
however, be permitted to seek extensions.
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Furthermore, if an investor opens an account in their
name and the name of their child, the total amount that they can invest (in
both accounts together) in a fiscal year is Rs.
1.5 lakh.
Maturity
The PPF account has a 15-year lock-in period that can be
extended. If there is no need for funds, it is always a good idea to keep the
account open for more than 15 years. The account holder has the option of
extending the duration by a 5-year block. Furthermore, there is no limit to how
many times an investor can extend their account.
An investor can always keep their account after maturity
without making any additional deposits for any period of time. They will
continue to earn interest on the account balance until it is closed.
Nomination
The account holder may nominate multiple people. If they
choose to nominate more than one person, the percentage of shares must be
specified. Furthermore, all nominees’ shares should total 100%.
Where to start
Anyone can open a PPF at a post office or a partnered bank
by submitting the necessary documents.
Account Switching
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Your PPF account can be transferred from a bank to a
post office and vice versa.
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Accounts can also be transferred between branches of
the same bank/post office.
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You must make a transfer request at your home branch.
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The new branch verifies and notifies the form’s
receipt.
In addition to the transfer request, the following documents must be submitted:
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Form for Nomination
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Passbook for the PPF
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Account certification copy
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Original account application form.
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A demand draught or check for the unpaid balance
Why should someone open a PPF account?
Here are some of the major PPF advantages that can be
obtained by investing in PPF.
Tax advantages
The most common reason for opening a PPF account is the
substantial tax benefit. The principal amount is exempt from taxation as long
as it does not exceed Rs.1.5 lakhs. Section 80C of the Income Tax Act contains
the laws that govern this. When the amount is redeemed after maturity, it is
still tax-free. As a result, you can invest up to Rs.1.5 lakhs tax-free each
year.
● Returns that are consistent and secure
PPFs are stable investments with a lot of certainty and
safety for risk-averse investors because they are government-backed schemes.
Because it is a government-guaranteed scheme, you can easily build a retirement
corpus for yourself with this instrument.
● Long-term commitment
An investor must commit to a PPF account for a period of
fifteen years. As a result, you can easily use the funds to plan for your
children’s higher education or retirement. Even after the 15-year lock-in
period has expired, you can keep the investment going by extending it for five
years at a time.
● Partially withdrawn funds
While partial withdrawals from the PPF account are
permitted, they are only permitted after the fifth year. The maximum withdrawal
amount is equal to 50% of the account balance at the end of the previous year.
● Loans from the PPF
Individuals can borrow against their PPF account between
the third and sixth years after opening one. Borrowers will have three years
from the date of disbursement to repay the loan amount.
These are some of the significant advantages of opening a
PPF account.
PPF New Regulations
To the benefit of account holders, the Government of India
recently notified new rules for public provident funds or PPF accounts. PPF is
a popular small savings scheme that provides a guaranteed return. PPF accounts
have a 15-year maturity period, and the government announces interest rates
each quarter. The current annual interest rate on PPF is 7.1%. For a calendar
month, interest is calculated on the lowest balance at the credit of an account
between the close of the fifth day and the end of the month. At the end of each
year, interest is credited to the account.
The new PPF rules are explained in detail below.
According to the new PPF deposit rules, an account holder
can make deposits in multiples of Rs. 50 as many times as they want during the
fiscal year, with a maximum combined deposit of Rs. 1,50,000. Previously, a
maximum of 12 deposits could be made in a single year.
The government allows the premature closure of PPF accounts
under certain conditions and only after five years of account opening.
Premature closure is permitted under current regulations.
Treatment of a life-threatening disease of the account holder,
his spouse, dependent children, or parents, subject to the production of
supporting documents and medical reports from the treating medical authority.
Higher education for the account holder or dependent
children upon production of documents and fee bills confirming admission to a
recognised institute of higher education in India or abroad. The government has
now added a new criterion for the premature closure of a PPF account: the
account holder’s change in residency status upon production of a copy of their
passport and visa or income tax return.
Loans from PPF accounts are available to account holders.
The rates at which the account holder can borrow from his account have been
reduced from 2% to 1% above the current PPF interest rate under the new rules.
In the event of the account holder’s death, the nominee or legal heir is
obligated to pay interest on the loan taken out by the account holder but not
repaid before his death. The amount of unpaid interest will be adjusted at the
time of the account’s final closure.
The previous limit was Rs. 25,000. The same is true for
post office recurring deposits, PPF accounts, and Sukanya Samriddhi accounts.
AII POSB cheques issued by any CBS Post Office should be
treated as at par cheques and should not be sent for clearing if presented at
any CBS Post Office. POSB cheques can be accepted at other SOLs or service
outlets (without a limit on the amount) for credit in POSB/RD/PPF/SSA accounts,
subject to the scheme’s limits, if any.
Conclusion
The Public Provident Fund PPF scheme is a safe investment
instrument for tax savings. Because the PPF scheme is backed by the Government
of India, the returns on such investments are guaranteed. As a result, the
returns on such investments are guaranteed. PPF is a good option for investors
who have a low risk tolerance and want fixed returns. This scheme provides
investors with numerous tax advantages. In other words, PPF investments are
tax-free for individuals. Individuals can use PPF to get a tax break under
Section 80C. More information is available on the PPF’s official website.