7 Must Know Facts About Public Provident Fund (PPF)
To accumulate money, it is necessary that you are in the habit of saving regularly and systematically. PPF is a better option for all investors for long term investment.
Due to the protection of the government, the money remains completely safe.
This excellent option also gives you the benefit of exemption in income tax. Loan facility is also given and its maintenance cost is very less. It is necessary to know seven facts about PPF, so that it can become more beneficial for you.
1. Where Can PPF Be Opened?
Any person who is a salaried employee or has a private business can open a PPF account by depositing as little as Rs 100. PPF account can be opened in any branch of State Bank of India and its associate banks.
Apart from this, some other nationalized banks also provide the facility to open PPF account. These banks are- Bank of India, Central Bank of India, Bank of Baroda etc. General Post Office also provides the facility of opening PPF account. Those parents who have minor children can also open PPF account in the name of those children.
2. Limit for Depositing Minimum and Maximum Amount of PPF
A minimum of Rs 500 is required to be deposited in a full year while the maximum amount to be deposited in a financial year is Rs 70,000.
The amount can be deposited at once or in installments as per convenience, but the amount to be deposited must be in multiples of Rs.10. The number of installments should not exceed 12 in a financial year.
If you fail to deposit the minimum amount, your account will become irregular. But interest will always be earned on it. The account can be re-regularized by depositing the full arrears along with the default fee.
3. Calculation of Interest on PPF Deposit
Interest on deposits in PPF is calculated on the minimum deposit amount between the 1st and 5th day of a month. To get maximum interest, try to deposit the amount between the first and fifth day itself.
Annual compound interest will be credited to your account every year on March 31, the end date of the financial year.
4. Premature Withdrawal From PPF
It is possible to withdraw all the money deposited in your PPF account only at the maturity period, but at the time of any financial crisis, withdrawal of money from PPF is allowed on the basis of certain conditions.
After completing the period of seven years, you can withdraw money from PPF once in a year.
This money can be withdrawn at the end of the fourth year 50 percent of the total amount deposited or 50 percent of the balance remaining in the previous year, whichever is less.
The closure of the PPF account during the maturity period is allowed only on the death of the member.
5. PPF Offers Multiple Tax Benefits
The amount deposited in PPF is taken under the provisions of Section 80C of Income Tax. Apart from this, the entire deposit amount, including the interest earned, is considered completely tax free. The interest earned on the deposit is not only tax free, but it is also exempted from property tax.
6. Do You Need a Loan? You Use PPF
You can take a loan from the money deposited in your PPF account subject to certain conditions. The loan can be taken for a period of six years after the third year.
At the end of two years, you can take a loan up to 25 percent of the total amount deposited in the next coming year, which is required to be re-deposited in 24 months.
The rate of interest on loan will be 2 percent more than the rate of interest available on PPF.
You can also take a second loan from PPF for a period of three years to six years, provided you have fully repaid the loan taken earlier. Keep one thing in mind in this regard that when you become eligible to withdraw the money deposited in PPF, then you will not be able to take loan from it.
A PPF account that becomes inoperative is not allowed to take a loan against the amount deposited in that account.
7. PPF Can Be Continued Even After Completing 15 Years
Even after completing the period of 15 years, the PPF account holder has the option of continuing it. After this period, money can also be deposited in the PPF account and you can also close it if you want.
Till the account is not closed, the interest earned on the deposited amount will continue to be available. The PPF account will be allowed to grow for as long as you want and there will be no restriction on withdrawal of money from it, but withdrawal will be allowed only once in a year.
If you continue to deposit money in your PPF account even after fifteen years, then you will be allowed to withdraw 60 percent of the money at the beginning of any year in a block of five years.