There is still time left to park your money in Public Provident Fund
this year and reap tax benefits. This section deals with certain aspects
related to Public Provident Fund and also help you to know how to open a
PPF account. This is one of the best avenues for investment with a long
term view and moreover your money in PPF can not be attached even by a
legal authority. The post gives you a brief summary of Provident Fund on Eligibility for Public Provident Fund, Subscription Limit for Public
Provident Fund, How to open a Public Provident Fund account, Nomination
of Public Provident Fund, Interest of Public Provident Fund, Premature
withdrawals from Public Provident Fund, Loans from Public Provident
Fund, Repayment of Principal and interest of loan from Public Provident
Fund, Lock-in-period for Public Provident Fund, Withdrawals on Public
Provident Fund maturity, Discontinuation of Public Provident Fund
account after maturity, Premature discontinuation of Public Provident
Fund account.
The Public Provident Fund is a Central Government scheme and is governed by Public Provident Fund Act, 1968 .
Eligibility:
Any
resident individual can open a Public Provident Fund [PPF] account
either in his/her own name or in the name of a minor. Non Resident
Indians (NRIs) are not allowed to open a PPF Account. But a resident who
subsequently becomes a non-resident may continue to subscribe to PPF
till its maturity on a Non Repatriation basis.
Limit of subscription:
The
minimum amount of investment is Rs.500 (five hundred) and the maximum
amount is Rs.70,000.00 (seventy thousand) in an year. The subscription
can be made in one instalment or in a maximum of 12 installments. The
subscriptions should be in multiples of Rs.5 (five)
To open the PPF Account…
You
just need to go to any of the branches of State Bank of India, its
associated banks or Head Post offices or a GPO with the relevant
documents like ID proof and Address Proof. Moreover, if you have an SBI
account and it has online banking facility, you can link PPF to this
account so that there can be automatic credits to this account.
Nomination:
Nomination
facility is available in the name of one or more persons. No nomination
shall be made in respect of PPF account opened in the name of a minor.
The nominee can not continue PPF account of the deceased subscriber in
his or her own name.
Interest:
Interest is credited to the
account annually, that is, by the end of March every year. Currently
interest rate is 8%. Interest is calculated on the lowest balance at the
credit of the account between the fifth and last day of each month.
Premature withdrawals from the Fund:
Withdrawal
is allowed after the expiry of five years from the end of the year in
which initial subscription is made.Only one withdrawal is allowed during
an year. The amount to be withdrawn should not exceed fifty percent of
the account balance at the end of the fourth year preceding the year of
withdrawal or at the end of the preceding year whichever is lower less
the amount of loan which remains to be repaid.
Loans from the Public Provident Fund
Loans
can be taken from the Fund but only during a fixed period of time.
After the end of the first year in which the initial subscription was
made but before the expiry of five years , an amount equal to twenty
five percent of the balance in the fund at the second year immediately
preceding the year in which the loan is applied for, can be taken as
loan. Second loan can be taken after repayment of the first loan.
Repayment of Principal and Interest for Public Provident Fund:
Principal
is to be repaid within 36 months from the first day of the month
following the month in which loan is sanctioned After the principal of
the loan is fully repaid, the subscriber shall pay interest thereon in
not more than two monthly installments at the rate of one percent per
annum of the principal for the period of commencing from the first day
of the month following the month in which the loan is drawn up to the
last day of the month in which the last instalment of the loan is paid.
Lock-in-period for Public Provident Fund:
The
account holder can withdraw the entire balance in the PPF account only
after the expiry of 15 years from the end of the year in which the
initial subscription was made.
Withdrawal on maturity:
The
PPF account holder can withdraw the entire balance after fifteen years
in lumpsum or in instalments not exceeding one in an year. If he chooses
to receive amount in instalment it implies that he is continuing the
account without deposits.
Continuation of account with deposits after maturity:
The
PPF account can be extended for one or more of block of five years. The
account holder should exercise this option before the expiry of the
sixteenth year.
Discontinuation of the PPF Account:
Premature
closure of the PPF account on account of valid and genuine reasons can
be considered only after the expiry of five years from the end of the
year in which initial subscription was made. The subscriber may
discontinue the account at any time after joining the fund. But the
repayment of the principal along with interest will be made only after
the expiry of 15 years from the end of the year in which the initial
subscription was made. Discontinued accounts can be revived on payment
of fee of Rs.50 (fifty) along with arrear subscription of Rs.500 (five
hundred) for each year.
Impact on your income tax:
PPF is
out of the tax-net throughout its life cycle, namely, investment,
earning and withdrawal. The amount invested in Public Provident Fund
qualifies for deduction under Income Tax Section 80C, subject to a
maximum limit of Rs.70,000.00(seventy thousand). Further interest earned
is completely tax-free. Also, the amount received either on withdrawal
or maturity is also not taxable. Thus PPF is an ideal investment avenue
for those who wish to preserve their capital…
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