What is a public provident fund? - PPF in Full Details ~ SAJEEL MONITOR

Public provident fund i.e. PPF account is an investment option. Investments up to Rs 1.5 lakh annually in this account are tax-deductible under section 80C. The amount received on maturity is also not covered by tax. In view of so many tax benefits, people open PPF account in their bank / post office.

PPF or Public Provident Fund is a savings scheme offered by the Government of India. Which was introduced by the National Saving Institute of the Ministry of Finance in 1968. Interest on PPF account is paid by the Government of India and is fixed every quarter. It is also tax-free under section 80C. The PPF interest rate is currently set at 7.1% for the period 1 April to 30 June 2020 (Q1 FY 2020-21). The PPF interest rate for January - March 2020 (Q4 FY 2019-20) was 7.9%.

You have to invest at least 500 rupees every year in PPF account and in this you can invest up to 1.5 lakh rupees every financial year. At present, you are getting 7.1% per cent interest annually on your deposits deposited in PPF account. Investment in PPF, interest and maturity amount, tax exemption on all three.

Salient features of PPF account: -

Principal and interest in PPF account is guaranteed by the government.
Contribution to the account up to Rs 1.5 lakh per year is tax free. Interest on PPF account is also tax-free.
The interest rate for PPF account is declared by the government every quarter. PPF returns exceed the FD rates of many banks in that period.
PPF account can be opened by any Indian citizen.
There is no maximum age restriction for opening a PPF account.
PPF accounts can be opened in post offices and branches of all government and major banks.
Being a government savings scheme, the entire guarantee of investment protection is given by the Government of India.
Children's account can also be opened under the guardianship of the guardian. Children older than 10 years can also open themselves independently.
This account can be opened with an initial deposit of at least ₹ 500 / -. And it is mandatory to deposit at least ₹ 500 / - in this account every year, otherwise a penalty of ₹ 50 / - per year can be imposed.
Up to a maximum of ₹ 1.5 lakh can be deposited in each financial year. And there is an exemption for depositing money up to a maximum of 12 times every year, who can deposit more or less at their convenience.
This account also has the facility of depositing money from NEFT / RTGS and net banking.
PPF account deposits, interest and withdrawals, all three are tax-exempt. After 5 years, the partial withdrawal amount is also completely tax free.
Good interest rate is available on the amount deposited in PPF account. Uniform interest rate is given everywhere in post office and banks.
There is also a facility to take a loan against the deposit amount from the third year of PPF account. Emergency also has the facility to close the account after 5 years of opening the account.
The entire amount along with interest is paid after completion of 15 years of PPF account. Even after maturity of the account, its duration can be extended for next five years.
There is also a facility to create nomini in PPF account.
As per the requirement, you can transfer the PPF account to your nearest post office or bank branch anytime.

Eligibility for PPF: -

Any person who is resident in India can open PPF account. PPF accounts can also be opened by parents for their minor children. NRIs cannot open PPF accounts. However, a resident Indian who has become an NRI after opening a PPF account can continue the account till maturity. Joint accounts and multiple accounts are not allowed to be opened.

Interest on PPF account: -

PPF is a fixed income investment. The interest rate on PPF account is notified by the Central Government every quarter. Interest on PPF is calculated on the minimum balance between the end of the fifth day of the month and the last day of every month. Currently the PPF account interest rate is 7.1% (May 2020).

Period of PPF account: -

The PPF account matures after the expiry of the next 15 years from the year the account was opened in which the account was opened. For example, if a PPF account was opened on 1 February 2005, it would mature for 15 years from 31 March 2005, ie 31 March 2020. On maturity, you can extend the PPF account indefinitely in a block of 5 years.

Nomination Rules for PPF Account: -

Enrollment in PPF account can be done in favor of one or more persons. It also requires specifying the percentage share of each nominee. Anyone, ie parents, spouse, relatives, children, friends etc. can be nominated. Form E is used to add a nominee to a PPF account.

Nomination can be made at any time during the tenure of the PPF account. Changes in enrollment, cancellation or alteration can be made through Form F.

Tax exemption in PPF account: -

Contribution to PPF account (up to Rs 1.5 lakh per annum) is exempted under Section 80C of the Income Tax Act, exemption on interest earned and maturity income is also exempt from tax. Interest earned on PPF account has to be mentioned on the income tax return.

Attachment Order Protection: -

PPF account cannot be attached under any order or decision of any court for any loan or liability under Government Savings Bank Act, 1873. It protects the account holders against all creditors including the Income Tax Department.

Loans on PPF account: -

Facility to avail loan on PPF account is available from the 3rd financial year till the 6th financial year from the date of account opening. In other words, a loan can be obtained at any time after the end of one year from the end of the financial year in which the account was opened, but before the end of the five years from the end of the financial year in which the account was opened.
For example, if the PPF account is opened on February 1, 2014 (financial year 2013-14), the end of the financial year in which the account was opened is March 31, 2014. The loan can then be taken from April 1, 2015 and can be availed from the end of the financial year of opening the loan account for the next five years i.e. March 31, 2019 (FY 2018-19).

The maximum duration of such loan is 3 years. The maximum loan amount on PPF accounts is 25% of the balance at the end of the previous financial year, the year in which the loan was applied for. for example,If the investor wants to take a loan in April 2014, the maximum loan that can be obtained will be 25% of the balance amount as on 31 March 2013. For taking loan against PPF account, it is necessary to submit Form D.

The rate of interest payable on loans taken against PPF account is 2% higher than the rate of interest then prevailing on PPF account.

To restart the inactive account: -

If a minimum contribution of ₹ 500 / - per annum is not made to the PPF account, the account becomes inoperative.

To reopen the account, an application has to be submitted to the post office or bank branch.

Each year a penalty of ₹ 50 / - has to be paid for the account becoming inactive. And a minimum amount of ₹ 500 / - is to be paid for all the following years from the financial year of account inaction.

Partial withdrawal from PPF account: -

Partial withdrawals can be done after the expiry of 5 years of the year in which the account is opened. For example, if the account was opened on January 1, 2014, withdrawals can be made from the financial year 2021-22. Only one partial withdrawal is allowed per financial year. The maximum amount that can be withdrawn per fiscal year is 50% of the account balance by the end of the financial year, before the current year, or 50% of the account balance by the end of the fourth financial year, before the current year.Form C is required to be deposited to withdraw partial amount from PPF account.

In case of premature closure of PPF account: -

Pre-mature closure of PPF account is not allowed within 5 years of opening the account. After that it can be closed only on specific grounds, such as serious illnesses of the account holder, spouse, dependent children or parents, who are at risk of life. But to prove these grounds, you must have a necessary medical document.

On the death of the account holder: -

After the death of the PPF account holder, the remaining amount in this account goes to the nominee or his legal heir. The requirements of paperwork and documentation related to withdrawal of this amount, however, may vary. It also depends on whether the nomination registration was done by the PPF account holder.
In case of death of PPF account holder, income of PPF account can be claimed by giving death certificate of account holder by nominee / legal heir in PPF account. The claimant has to submit form G and an application form along with information related to the claim like account number, nominee details etc.

Maturity of PPF account: -

The PPF account matures after a period of next 15 years from the end of the account opening financial year. At the time of maturity, the account holder has the following options: -

Withdrawal of maturity
The account holder can withdraw the PPF amount as well as the interest earned. The entire maturity is exempt from income tax.

Forms used in PPF account: -

PPF FORM A Account Opening
PPF FORM B Contribution
PPF FORM C Partial Withdrawal
PPF FORM D Loan
PPF FORM E Nomination
PPF FORM F Change of Nomination
PPF FORM G Claim
PPF FORM H Extension

About sajeel monitor

My name is Sajeel Ahmad I am a Software Developer, Blogger, Entrepreneur, Digital marketer, Technology, and many more...After completion of my studies in Bhopal, I move to Delhi for my first job. I started working in TCS as a software I am fascinated my page viewer in all languages to read the blog easilyengineer.