Public Provident Fund India [PPF]
The PPF [Public Provident Fund] is most popular income tax saving scheme after LIP in India. PPF offers an investment with assured returns combined with income tax benefits. The PPF scheme is governed by the Public Provident Fund Scheme 1968 and the Public Provident Fund Act, 1968 (23 of 1968). The main features are below:
- Eligible Person to open PPF Account: Individual in his own name or his minor children. Non-resident Indians, HUF are not eligible to open PPF a/c.
- Nomination: The account holder can nominate one or more persons to receive the balance in the event of his death.
- Maturity Period :15 years which may extends upto 5 years.
- Minimum Deposit Rs.500/- Per year and highest limit is Rs.150000/- in one Financial Year. Default fee of Rs.50 will be charged if no deposit is made during a financial year.
- Withdrawal: Partial withdrawal/loan allowed during lock in period. Withdrawal is permissible from seventh financial year from the year of opening, limited to one in a financial year. Amount of withdrawal is limited to 50% of balance at the end of fourth preceding year less amount of outstanding loan or 50% of balance at the end of immediate preceding year of withdrawal less amount of outstanding loan, if any which ever is less.
- Interest rate: 8.70% p.a. w.e.f. 01-04-2014
- Tax Exemption : Maximum deduction from gross total income is Rs.1,50,000/- u/s 80C of Income Tax Act,1961. Interest is completely tax free under section 10 of Income Tax Act, 1961. Deposits completely exempted from wealth tax.
- Loan: Loan is admissible from the third Financial Year. Loan amount is limited to 25% of the balance at the end of two years preceding. Fresh loan is not allowed when previous loan or interest thereon is outstanding. Interest is charged at the rate of 2% is prepaid within 36 months (1% if the loan was taken prioir to 01-12-2011) and 6% on the outstamding loan after 36 months.
Frequently Asked Question on Public Provident Fund ( PPF )
1.Whether a minor can open PPF account in India?
A minor is not eligible to open PPF account. However PPF account can be opened in the name of minor by his parents/Guardian.
2.What are the special advantage of PPF?
Contribution to PPF is eligible to deduction u/s 80C. Interest is tax free. Loan/partial withdrawal is allowed.
3.Can a person open more than one PPF account?
NO. A Individual cannot open more than one PPF account in his name.
4.Can a NRI subcribe to PPF account in India?
No. A NRI is not eligible to open PPF account. However an account opened before he became NRI can be continued in absense of any bar for such continuance. Notification No.GSR 585B, dated 25-07-2003 bars non-resident Indians from opening ac PPF account.
5.How much time a PPF account can be extended by a subscriber?
Though the period of PPF account is 15 years, it can be extended by a further period of block of every 5 years with an option of contributing or not contributing any amount during the extended period.
6.Whether PPF account is subject to attachment?
The PPF account cannot be under decree or order pf a court of law. The Income Tax authority cannot attach PPF account. [Ministry of Finance (DEA) letter No.7/21/88-NS-II dated 10-08-1990 as circulated by Director General of Post’s Letter No.38-2/90-SB dated 07-11-1990]
7.Whether HUF can open PPF account in its name?
HUF is not eligible to open PPF account.
8.Is pre-mature is allowed in case of PPF account ?
In special cases of hardships, PPF can be pre-maturely closed after 5 year with approval of MOF. (Ministry of Finance (DEA) letter No.F.3(4)-PD-74 dated 29-06-1974)