PPF is a simple and beneficial scheme. The PPF account opener never regrets. Yes, it does not get much publicity because the agent does not get a commission in this scheme. So let us give you complete information about PPF.
Importance of Opening a PPF Account
The principal and interest in the PPF account are guaranteed by the Government.
Indian residents of age 18 years and above can open a PPF account. Only one account per person can be opened.
Non- Residents of India are not eligible to open a PPF account. However, NRIs of Indian origin who earlier had PPF account can continue their account until the lock-in period of 15 years ends.
Contributions to the account Rs 500 to Rs 1.5 lakh per annum are tax-free. Interest on the PPF account is also tax-free.
Interest Rate for the PPF account is declared by the Government every quarter. PPF returns are higher than FD rates of many banks in that period.
The PPF account is immune from attachment from any order or decree of any court under the Government Savings Banks Act, 1873.
Here is a brief PPF interest rate history:
|Quarter||Q3, FY 18-19||Q4, FY 18-19||Q1, FY 19-20||Q2, FY 19-20|
PPF in the name of minor
A PPF account on behalf of a minor can be opened by either father or mother. Both the parents cannot open a separate account for the same minor. An individual may, therefore, open one PPF account on behalf of each minor of whom he is the guardian.
How to open a PPF Account
PPF accounts can be opened a post office, nationalized banks and major private banks such as ICICI and HDFC. In several banks like ICICI and HDFC, you can open a PPF account online through net banking as well. Once the account is opened, a passbook similar to the bank passbook is issued. All transactions such as subscription, interest, withdrawals, etc. are recorded in this passbook. Some banks simply allow PPF entries to be viewed online instead of issuing a passbook.
PPF account opening form (Form A), the same can be obtained from specified bank branches or can be downloaded online.
Photograph of the account holder
PPF Premature Termination
The PPF account can be closed prematurely after completion of five financial years on the following grounds:
Treatment of serious ailments or life-threatening diseases of the account holder, spouse or dependent children or parents
Higher education of the account holder or the minor account holder.
One percent interest will be deducted from the applicable interest rate on the premature closure of the PPF account.
Death of account holder
In case of death of PPF account holder, PPF account income can be claimed by the nominee / legal heir. The claimant has to submit an application form along with Form G. G requires information related to the claim such as account number, nominee details, etc. Documents are required to be submitted for claiming PPF account income.
Tax exemption under PPF scheme
PPF is a scheme related to your social security and the government wants to promote it. Therefore, the government offers several tax benefits on this scheme.
Under Section 80C, every year, the amount you put in PPF account is deducted from your taxable income. In this way, PPF gives you the benefit of tax deduction. Under this rule, you can get a tax rebate on deposits up to a maximum of Rs 1.5 lakh every year.
You get interest every year on the amount deposited in PPF account. But this interest is not added to your annual taxable income. That is, the interest on PPF is tax-free. On the other hand, the interest on fixed deposits is taxable.
Whenever you withdraw money when PPF account matures, it is also completely tax-free. This money can be in millions. But it will not be taxed.
How many Account in a Family?
Two guardians cannot open separate accounts in the name of a single child or minor.
Suppose you have two children, then all of you together can open a maximum of four accounts. Two husband and wife names, and two both children’s names, as guardian.
Suppose you have opened a PPF account for yourself and for both your children. In such a situation, the amount deposited as PPF in these three accounts should not exceed Rs 1.5 lakh.
PPF Account can no longer be opened as a Hindu Undivided Family (HUF). This facility has been closed since 13 May 2005. But if your account is before it, then this facility will be operational for them till maturity. The HUF accounts cannot be extended for a period extension in a 5-year block with a single account.
NRI PPF Rules 2019
The new rules will apply only when an NRI has an existing PPF account already. As an NRI, you will not be able to open a new account. However, all NRIs who had closed their account between October’17 and February’18 due to lower interest rates will not be able to avail the benefits of the new rules unless they become a Resident Indian.