Provident Funds
Public Provident Fund, or PPF, as it is more
popularly known, is a savings-cum-tax-saving instrument. It also serves as a
retirement-planning tool for many of those who do not have any structured pension plan
covering them.
Rate of return
9.0 %p.a. (Compounded
annually)
Tax consideration
Interest is totally exempt from income tax, upto a maximum investment of Rs. 60,000
per year .
No TDS on interest.
Mode of account-holding
An individual, including a Hindu undivided family can open only one account. A person
having a GPF, EPF, CPF accounts can also open a PPF account. More than one account/joint
accounts are not permitted. Both, the parents and the child, can contribute out of their
respective incomes chargeable to tax and earn rebates.
The PPF account can be opened in a Head post office, or in a branch of the SBI or its
subsidiaries (excluding offices managed by single officer or clerk), and also at specified
branches of some other nationalised banks.
Mode of payment
Every subscription shall be made in cash or through a crossed cheque or draft or
postal order, in favour of the accounts office, at the place at which that office is
situated. In case of any cheque, draft or postal order should be drawn at a bank or post
office at that place.
Nomination
Nomination facility is available in case of the PPF account.
Investment limits
The contribution to the account can vary from year to year, from a minimum of Rs.100
to a maximum of Rs.60,000 in any given year.
Investments in a PPF account can be made in multiples of Rs.5, either lumpsum, or in
installments (not exceeding 12 in a year). The credit to the PPF account is made on the
date of presentation of the cheque and not on the date of its clearance.
Tenure
The tenure of the PPF account is 15 years, which can be further extended in blocks of
5 years each for any number of blocks.
Loans
A loan repayable in 36 months can be obtained in or after the 3rd year, up to 25 per
cent of the balance at the end of the preceding financial year. The interest charged on
the loan is 12 per cent, for the first 36 months, and thereafter, an additional 6 per cent
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.
Withdrawls:
A withdrawal is permissible every year from the 7th financial year of the date of
opening of the account. Only if the amount does not exceed 50% of the balance at the end
of the 4th preceding year, or the year immediately preceding the year of the withdrawal,
whichever is lower, less the amount of loan if any.
Defaults & revival
If the PPF account-holder fails to deposit the minimum Rs.100 in a given financial
year, the account is considered as discontinued but the interest will continue to accrue
and paid at the end of the term. The default can be got condoned on payment of a fee of Rs
10 for each year of default, along with the arrears of subscription of Rs.100 for each
such year.
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