Public Provident Fund
How does one open a PPF account?
- An individual, including a Hindu Undivided Family can open only one account. Two accounts, even at different places anywhere in India, are not permitted. Similarly, joint accounts are not allowed. Contributions in the names of spouse and children, major or minor, qualify for the rebate but will be construed as gifts. Both the parents and the child can contribute out of their respective incomes chargeable to tax and earn rebates.
- The Contribution to the account can vary from year to year, at minimum Rs. 100 and maximum Rs. 60,000. It is not possible to contribute more than Rs. 60,000 in one account during the same year. The last contribution can be made during the 16th financial year, even on the last day.
How does one subscribe to the PPF account?
- Subscription to the PPF account shall be in multiples of Rs. 5 and paid in lumpsum or in installments not exceeding 12 in a year, even during the same month.
- The credit to the PPF account is on the date of presentation of the cheque and not the date of its clearance, unless the cheque bounces.
- If the holder fails to subscribe even the minimum Rs. 100, the account is considered as discontinued but the interest will continue to accrue and paid at the end of the term i.e., 15 years. Loans and withdrawals are not available. The default can be got condoned on payment of a fee of Rs. 10 for each year of default, along with arrears of subscription of Rs. 100 for each such year. An account holder in possession of a discontinued account can open a new account.
How is the interest calculated in the PPF account ?
- Interest is earned @ of 12% p.a. and is tax-free. It is calculated on the lowest balance between the close of the fifth day and the last day of every month and is credited to the account at the end of each financial year i.e., on 31st March.
How can one take a loan from the PPF account ?
- A loan, repayable in 36 months, can be obtained in or after the 3rd year upto 25% of the balance at the end of the preceding financial year. Interest is 1% p.a. i.e., effectively 13% out of non-taxable income (1% + 12%), for the first 36 months, and thereafter 6% on the outstanding amount. A second loan can be obtained before the end of the 6th financial year if the first one is fully repaid.
When can a PPF account be closed?
- PPF can be closed on completion of the term. Alternatively, it can be continued for a block of 5 years. This facility can be enjoyed for a further block of 5 years on expiry of 20 years and yet another 5 years on expiry of 25 years and so on for any number of blocks. Such continuations can be with or without contribution.
- Yes. A subscriber can continue his account with fresh subscriptions and can withdraw upto 60% of the balance to his credit at the commencement of each extended period in one or more installments, but only one per year.
- An account can be continued without subscription as well, for which normal interest will be paid till it is completely withdrawn. Such an account has the status of being a discontinued account and therefore, no partial withdrawals are permitted. It is absolutely necessary to file 'Form-H' for continuation with subscription. Otherwise the benefit of Sec. 88 will not be available on fresh deposit. The contributions will not attract any interest! The account can be regularised by approaching Ministry of Finance. If an account holder is in the extended period and has yet not filed Form-H, it is necessary to approach Ministry of Finance. No special action is necessary to continue without subscription.
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The nominee can claim the dues, on demand. However, the balance, if not withdrawn, continues to earn interest. Where there is no nomination in force, the balance will be paid to the legal heirs on production of succession certificate/probate. To mitigate hardships, if the balance is less than Rs. 1 lakh, it will be paid to legal heirs on production of
- a letter of indemnity,
- an affidavit,
- a letter of disclaimer and
- the death certificate.
Can a PPF account be continued after the term with fresh subscriptions ?
Can a PPF account be continued after the term without fresh subscriptions ?
How can the PPF account be claimed by the nominee ?
Appli. Form