Public Provident Fund (PPF) | PPF Scheme | 15 lesser known facts about PPF Account

Public Provident Fund (PPF) | PPF Scheme | 15 lesser known facts about PPF Account

The Public Provident Fund (PPF) is one of the most popular tax savings instruments in India. PPF provides savings on income tax with the attractive interest rate on investments. 

Many of us know that the PPF comes with a lock-in period of 15 years. But there are a few things about the PPF that not many of us are aware of. 

In this post, I will try to clarify few things about the PPF that you need to know.

Public Provident Fund (PPF) | 15 lesser known facts about PPF account

1. The risk involved

PPF is a government-backed, the long-term small savings scheme. Investment in PPF is completely risk-free because of the government backing.

2. Returns on PPF are guaranteed but interest rate fluctuates

The returns on PPF Scheme are guaranteed as the scheme is backed by the government of India, but it is not fixed. The interest rate for PPF scheme is announced by the government of India every quarter, therefore, the interest rates keep changing on a regular basis. The interest rate usually hovers between 7-8%.

 
3. Minimum and maximum amount of investment

PPF account can be opened with Rs. 100 but you have to deposit a minimum of Rs. 500 in a particular financial year and maximum Rs. 1.5 lakh. You can invest in a single lump sum or in any number of installments during a financial year.

4. Best time to deposit money in PPF account

You should deposit money in your PPF Account before the 5th of every month because the calculation of interest is done on the least balance between the 5th day of the month and end of the month. If you deposit money after the 5th day of the month then you will earn lower interest.

Also read: PPF and  NSC | New rules for NRIs

5. Maturity date of PPF account

Many of us know that the PPF comes with a lock-in period of 15 years. But maturity date of a PPF account is not calculated from month or date the PPF account was opened. As per the PPF scheme rules, the maturity date is calculated from the end of the financial year in which the PPF account was opened. For example, you opened your PPF account on June 12, 2019. The maturity date of your PPF account will be calculated from March 31, 2020, and it will be April 1, 2035.

6. PPF account on behalf of a minor child

PPF account on behalf of a minor child can be opened and operated by either mother or father. Both cannot open two separate PPF Accounts for the same minor. After the death of the parents, the legal guardian is eligible to open a PPF account on behalf of a minor child.

7. Online transfer of money to PPF account

PPF account in most of the banks can now be operated online. You can transfer money to your PPF account online through internet banking.

8. Transfer of PPF account

The PPF account can be transferred from post office to authorized banks or vice versa. You can also transfer a PPF account from a bank branch to another branch or to other banks branch.

Also read: All about ELSS | Equity Linked Savings Scheme | Tax Saving Mutual Funds

9. Taxation on PPF amount

PPF investments enjoy triple tax exemptions: First, investments in PPF account up to Rs. 1,50,000 qualify for deduction under Section 80C of the income tax act. Second, the interest earned yearly is tax-free. Third, the entire maturity amount including the interest is non-taxable.

10. Partial withdrawals

PPF account has a lock-in period of 15 years i.e. it matures on completion of 15 years. However, partial withdrawals are allowed from 7th year onwards subject to certain conditions depending on the PPF balance and number of years completed. Only one withdrawal is allowed every financial year.

11. Premature closure

Premature closer is allowed under certain circumstances such as serious ailment of the PPF account holder, spouse, dependent children or parents, or for higher education for self or dependent children, or if a change in the account holder residency status. This is allowed only if your PPF account has completed 5 years. This will allowed with a penalty of 1% reduction in interest on the whole deposit. 

12. Loan on PPF account

The loan is allowed against PPF account, subject to certain terms and conditions. The loan can be taken only between 3rd to 6th financial years.

Also read: 7 habits that can make you rich

13. Revival of discontinued PPF account

Discontinued PPF account can be revived by paying the minimum deposit of Rs. 500 with default fee of Rs. 50 for each defaulted year.

14. Court Decree

PPF account cannot be attached under any decree or court order to pay off any debt or liability incurred by the PPF account holder.

15. Extension of PPF account after maturity

The PPF account holder has the option to extend the period of the PPF account after maturity. The period of PPF account can be extended for one or more blocks of 5 years each. You can choose from two options of extension: (i) Extension without contribution (ii) Extension with contribution.

Also read: SBI PPF Account | How to open PPF account in SBI?

Also read: National Saving Certificate (NSC)

Also read: Post Office small saving schemes

Also read: 10 Tax saving options other than Section 80C

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Public Provident Fund (PPF) | PPF Scheme | 15 lesser known facts about PPF Account