What is PPF account

  • PPF stands for Public Provident Fund account.
  • It is a long term savings account which matures on completion of 15 financial years (FY) from the end of year in which the account was opened.
  • minimum deposit is Rs. 500 and maximum deposit allowed is Rs. 1,50,000 in a FY.
  • loan can be taken from 3rd FY upto 6th FY.
  • withdrawal from the account is possible from 7th FY onwards.
  • PPF account can be opened for a minor or person of unsound mind (for whom the account opening person is a guardian)
  • PPF accounts can’t be jointly held.

Tax benefits

  • The amount contributed to PPF qualifies for deduction under 80C upto 1,50,000
  • One can claim tax exemption by depositing amount to the PPF account of self/ spouse / children
  • Interest earned from PPF account is exempt from income tax under Section 10
  • Interest for PPF account changes every year and one can find the current and past interest rates in https://www.nsiindia.gov.in/(S(51iecpmnmhavwfzoazctjmms))/InternalPage.aspx?Id_Pk=178

Protection of credit balance from attachment

  • Amount received from a PPF account by an account holder shall not be liable to attachment under any order or decree of any court in respect of any debt or liability incurred by the account holder.

Premature closure of PPF account

Premature closure of PPF account is allowed in the following circumstances,after 5 years of opening the PPF account.

  • treatment of life threatening disease of account holder, his/her spouse or dependant children or parents

  • higher education of account holder or dependant children

  • on change of residency status of the account holder

Withdrawal from account

  • After 5 years from the end of year in which the account was opened, account holder may withdraw amount upto 50% from the account balance.
  • only one withdrawal per year is allowed.

Discontinued PPF account

  • PPF account is considered discontinued if the account holder fails to pay the minimum depoist in the year.
  • a discontinued PPF account can be revived by paying Rs. 50 + Rs. 500 for every year for which the deposit is not made,at the time of maturity.
  • loan and partial withdrawal not allowed in a discontinued PPF account.

On completion of 15 years

  • Closing the account

    • account holder can close the account and withdraw the entire amount from PPF account.
    • account holder may retain the account without making any further deposits.
      • The amount in the account will continue to earn interest.
      • account holder can do one withdrawal in a year from the available amount.
    • once account is continued without deposits for more than a year, then no more deposits will be allowed in the account.

  • Extension of the account

    • option to extend the account has to be made by the account holder before expiry of one year from maturity of the account to the accounts office with Form-4
      • no deposits will be allowed if account holder fails to give his option to continue the account
      • any deposit made in such account shall be treated as irregular and refunded

On death of account holder

  • account shall be closed and eligible balance amount is paid to nominee or legal heir.

References