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Holistic Investment - PPF

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

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.

One of the popular, preferred, and preeminent tax saving investments is PPF – Public Provident Fund. We all know about PPF. Do we know all about PPF? Let us discuss in detail about PPF in this article and understand it comprehensively and completely.

1) Where to open the PPF account?

PPF accounts can be opened in a post office and also ppf account can be opened in selected bank branches. The regular KYC documents need to be submitted for opening a PPF account with a minimum investment of Rs.500.

2) What is the interest rate?

The current interest rate for PPF is 8.10% p.a for the april–june quarter 2017. The interest rate will change every financial year in accordance with the Government bond yield.

3) How is the interest calculated?

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

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.

4) What is the tax benefit?

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

These tax benefits are available as of now. If DTC is implemented, then the tax benefits will change prospectively and not retrospectively.

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5) What is the minimum and maximum investment of ppf?

The minimum amount needed to be invested every year is Rs.500. The maximum amount of investment allowed every year is Rs.1.50 lack. You can make investments 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 Rs. 1.50 lack.

Not making the minimum investment in a year will attract a penalty of Rs50.

6) When does 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.

7) Can I withdraw from my ppf account in between?

Yes. You can withdraw after the 6th year. However, you can withdraw only up to 50% of the balance at the end of 4th year or at the end of immediate preceding year whichever is lower. You will be allowed to withdraw only once in a year.

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

Yes. You can avail the loan facility only from the 3rd year. You will be allowed to take a loan to the extent of 25% of the balance in the previous year.

9) Can an NRI open a PPF account?

NRI can’t open a PPF account. If you open a PPF account as a resident and subsequently you become an NRI, you will be allowed to continue and contribute till its maturity on a non-repatriable basis.

PPF account in case of death

10) 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 even before the completion of 15 years, to the nominee or legal heir of the deceased person.
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.

With the above points, you could have got a clear review about 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 let us know through the comment section.

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5 thoughts on “10 Things you may not know about PPF”

  1. 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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