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PPF Tax Savings

Will : legal declaration of how a person wish his/her possession to be disposed after their death

Fund : An amount of money saved or collected for a particular purpose

Return : Profit or loss derived from an investment

Person(s) appointed by the account holder, to whom the securities/properties will be transferred in order to facilitate the transmission process among the legal heirs, in case of death of the owner of the security/property.

Public Provident Fund (PPF) – is one of the popular, preferred, and preeminent tax saving investments . We all know about PPF. But do we know all about PPF?

Let us discuss in detail about the less known facts of PPF in this article and understand it comprehensively and completely.

    Table of contents

1) What is PPF?

The Public Provident Fund (PPF) Scheme is a tax-free savings account scheme offered by the Government of India. The PPF is a safe investment because it is backed by the Government and can’t be attached for your debt or liability. The benefits of a PPF account you can enjoy are high returns, tax-exemption, and security to capital.

2) How to open/invest in a PPF account?

Places, where a PPF account can be opened are Post Office & Banks(Selective). Most banks offer online facilities to open a PPF account, whereas a Post Office still follows the traditional offline method. Let’s take a look at the eligibility criteria and requirements to open a PPF account.

Eligibility to open a PPF account:

  • The individual should be an Indian resident.
  • The individual should not hold any other PPF account. An individual can hold only one PPF account.
  • NRI’s cannot open a new PPF account. But an NRI who opened a PPF account while they were residing in India can continue to deposit only until the maturity period.
  • Minors can open a PPF account in association with their parent/guardian.

Documents required to open a PPF account:

  • PPF account opening Application Form – from the respective platform (Bank/Post Office).
  • Identity Proof (PAN/Driving license/Voter ID/Passport/Aadhar Card).
  • Address Proof (Telephone bill/Ration card/Aadhar Card)
  • Two passport size photograph.
  • In case of a minor account holder, Birth Certificate will be required.

Remember to take all the originals and also a photo-copy that is self-attested. A minimum deposit of ₹ 500 should be made while opening the PPF account.

3) What is the interest rate of the PPF scheme (as in 2019)?

The interest rate of the PPF scheme will change for every quarter of a financial year in accordance with the Government bond yield. The interest rate of the PPF savings scheme has been around 8% on an average for the past 15 years consistently.

The current interest rate for PPF is 7.9 % p.a for the 2nd quarter (July – September) of 2019.

4) How is the interest calculated in a PPF account?

PPF tax saving

For the balance amount in your PPF account, the interest is compounded annually. However, the interest calculation will be done each and every month.

A tip to get maximum interest from PPF:

If your contribution to the PPF account is credited on or before 5th of that month, then that contribution will bear interest for that month too. If it is credited after 5th of that month, you will get interest only from the subsequent month. Therefore, if you make sure your contribution is

getting credited in your account on or before 5th of that month, and then you will not miss the interest for that month as well.

5) When does PPF interest get credited?

As per norms, PPF interest is calculated every month but it is credited into the account at the end of every financial year on March 31.

6) What is the minimum and maximum investment of a PPF?

The minimum amount needed to be invested every year is Rs.500. The maximum amount of investment allowed every year is ₹ 1.50 lacs. You can make investments in a lump sum or through a maximum of 12 installments per year. If your minor child also holds a PPF account then the combined limit of both the PPF account is limited to ₹ 1.50 lacs.

Not making the minimum investment in a year will attract a penalty of ₹50.

If you invest more than the ₹ 1.5 lacs limit, you will not get any interest for the excess amount and it will be refunded to you.

7) What are the tax benefits in a PPF account?

Under Section 80 C, the contribution you make in PPF is eligible for a tax deduction. Also, the interest from PPF is also tax-free.

These tax benefits are available as the PPF falls under EEE (Exempt, Exempt, Exempt) tax basket.

But the tax-exemption by 80 C is limited to a maximum investment of ₹ 1.5 lacs.

Tax benefits of PPF after maturity period:

You can enjoy the tax benefits even after the maturity period of 15 years if you choose the option to extend it with or without fresh contribution under section 80 C limitations (< ₹ 1.5 Lacs).

8) When does a PPF account mature?

A PPF account will mature at the end of the 15th year. This can be extended for one or more blocks of 5 years thereafter.

There is a common confusion about the maturity period of the PPF. For example: If you open a PPF account on 17th July 2019 most people think their PPF mature exactly after 15 years, on 17th July 2034. But your PPF will actually mature on 1st April of 2035. (a PPF matures only on the beginning of the subsequent financial year after completion of 15 years)

9) How to extend the PPF maturity period?

In order to extend the PPF account without fresh contribution, you need not do anything. The account gets extended automatically for the next set of 5 years. Interest will be earned for the existing balance for the next 5 years. Once the PPF account is continued without minimum deposit for more than a year, you cannot make a deposit to that account for the next 5 years.

In order to extend the PPF account with a fresh contribution, you need to intimate the Accounts Office within one year after maturity along with a filled-in Form-H. If you keep making deposits after maturity without intimation through Form-H, then your account will be treated as irregular and no interest will be paid.

10) Can I withdraw from my PPF account before maturity?

Yes. You can withdraw from the 7th year. However, you can withdraw only up to 50% of the balance at the end of 4th year or 50% of the balance at the end of the immediate preceding year whichever is lower. You are allowed to withdraw only once in a year.

How to withdraw from PPF account in case of an emergency?

After completion of the 5th year, you can close the PPF account in case of emergency situations like,

  • A life-threatening medical diagnosis of the account holder, spouse, children, parent or the minor account holder.
  • Higher education expense of account holder or the minor account holder.

Documents required to withdraw from PPF account before maturity

  • Form-C.
  • Any documents as proof for the emergency event.

11) How to withdraw from PPF account after maturity?

Once your PPF is matured, you can close the account and withdraw the full amount from the account. Also, as we discussed earlier you can choose to extend the term of PPF for another 5 years with or without contribution.

The documents required to withdraw the balance from the PPF account after maturity.

  • Form-C filled in by the PPF account holder.
  • Passbook of the PPF account holder.

12) Can I get a loan against my PPF account?

Yes. You can avail the loan facility only from the 3 Financial year to the 6th Financial year. For example: if you opened a PPF account on 18th July 2019, (i.e. FY 2019-20) you can get a loan from 1st April 2021 (i.e. FY 2021-22) to 31st March 2025 (i.e. FY 2024-25).

You will be allowed to take a loan to the extent of 25% of the balance in the previous year.

However, you are allowed to take a loan only once in a year.

How to get a loan against my PPF account?

From the 3rd year to 6th year, you are eligible to apply for a loan against your PPF account.

The documents required to get loan against PPF account

  • Form-D filled by the PPF account holder.
  • Passbook of the PPF account holder.

PPF Loan Interest rate:

The interest rate for the loan against PPF account is 2% above the PPF interest rate you receive.

PPF Loan Repayment:

The loan against PPF must be repaid within 36 months. After repayment, you can avail a loan with the 6th Financial year. Even if you repay the loan in the same year, you cannot take another loan within the same year.

13) Can an NRI open a PPF account?

The 2019 notification about NRI PPF account states that anNRI can’t open a new PPF account. If you have opened a PPF account as a resident and subsequently you become an NRI, you will be allowed to continue and contribute until the maturity of 15 years on a non-repatriable basis. The NRI PPF account holder cannot extend the tenure of the PPF.

How to Invest/deposit in an existing NRI PPF account?

If you hold a PPF account and have become an NRI during the tenure, you can continue to deposit/invest in the PPF account through your Non-Resident Ordinary or Nonresident External (NRO/NRE) account.

PPF account in case of death

14) What happens if the PPF account holder dies?

In the event of the death of the PPF account holder, the balance amount in the PPF account will be paid to the nominee or legal heir of the deceased person even before the completion of 15 years.

The death benefit from the PPF account is the contributions made along with the accrued interest
The nominee or the legal heir is not allowed to continue the PPF account by making fresh contributions to it.

Documents required for death claim from PPF account:

After the death of PPF account holder, the account needs to be properly closed to avoid legal action. The below mentioned documents are required for death claim from PPF account.

  • Form-G filled by all nominees.
  • Death certificate of the PPF account holder.
  • Passbook of the PPF account holder.

15) PPF nomination rules.

Nomination is not allowed for an account opened on behalf of a minor. You cannot make a Trust as your nominee.

The nominee can only collect the accrued amount on death of the subscriber but is not allowed to continue contributing to the PPF account, because a PPF account is not transferable.

If nomination is not mentioned in the PPF account, then the balance amount goes to the legal heirs or holders of succession certificate.

According to the Law of Succession, if the nominee is not the legal heir, then the nominee can only act as a trustee for the benefits of the legal heirs or the holder of succession certificate. The nominee cannot resist to handover the amount to the legal heirs.

How many nominees can be in a PPF account?

One or more number of nominees can be added in a PPF account. You can add or remove nomination at any time during the tenure period of the PPF(at free of cost).

  • Form-E is the documents required to add a name in the nomination in PPF account.
  • Form-F is the documents required to change the name in the nomination in PPF account.

In case of multiple nominees, you should mention the % of the share for each nominee. If the share % is not mentioned, then the amount will be shared EQUALLY.

With the above points, you could have got a clear review of PPF. PPF is an excellent tax saving option . It needs to be part of your tax-saving investment or not, depends upon your overall tax plan and asset allocation for the current year. Do your tax plan and check PPF fits into your tax plan in the current year.

What do you think about investing in PPF? If you have any queries about this article let us know through the comment section.

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18 thoughts on “Public Provident Fund |15 Things you may not know about PPF”

  1. I am an NRI and a nominee to the PPF account of my mother. As my mother passed away recently, the PPF proceeds will be transferred to me. I want to know the tax treatment on the receipt of this PPF proceeds. Can I put it in NRE account and treat it as tax free?

    1. Yes, you can get a tax-exempt as the fund you are about to receive falls into inheritance category.
      But, you cannot receive the funds directly to your NRE account, you have to receive the PPF proceeds through your NRO account and then transfer the proceeds to your NRE account.

      Note: There is a maximum limit for fund transfer from NRO to NRE account which is 1 million USD per financial year. You can get more details on NRO to NRE transfer in this article.(https://www.holisticinvestment.in/transfer-of-funds-from-nro-to-nre/)

  2. Hello

    Regarding the PPF account status on death of the holder,

    1. In case of death in 16th year of the account, can the account be continued till coming March 31st which is anyway after the date of maturity without extension?

    1. Hi Vishu,

      There is no way to extend or officially continue PPF account after the death of the PPF account holder. However, PPF continues to give interest till the death claim is filed.

  3. Can a nominee of PPF be a Non Resident Indian . He is non resident as working out of India for more than 182 days in a financial year.

  4. What is the procedure of calculation of interest in ppf a/c after death of holder and the nominee will claim and the claim is Seattle on 20th day of the month.,can nominee will get interest up to 20th day of the month or previous month

    1. PPF interest is calculated based on the lowest available balance between 5th of the month and end of the month. If it is withdrawn at the 20th of the month, then there will be zero balance at the end of the month. That will be considered as the lowest and no interest will be due for that month. It is better to close the PPF account at the beginning of a month.

    1. No.
      The legal heir needs to close the PPF account within a reasonable period (say 3 months) after the death of the PPF account holder.

  5. In case of death of PPF account holder, when the money is transferred to the nominee or legal hire; is there any tax liability (for the hier) on the amount they’ve received?

    1. Hi Abhilasha, Once the claim is applied with necessary supporting documents, the money will be transferred to nominee.
      There is no tax liability to nominee as PPF returns are tax free.
      Regards, Ramalingam

  6. Hello

    Regarding the PPF account status on death of the holder,

    1. Can the account be continued till maturity without further contributions?

    2. In case of death in 15th year of the account, can the account be continued till coming March 31st which is anyway the date of maturity?

    1. After death of the PPF account holder, additional deposit can’t be done. However, it can be continued with existing deposits that will fetch you interest.

      But it is riskier to continue the PPF account after the death of the account holder because a nominee can’t appoint a nominee. In case if the nominee also dies when the account is continued, the claim becomes complicated.

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