Post Office Public Provident Fund(PPF)

 

1-What is the post office Public Provident Fund (PPF) account?

PPF stands for Public Provident Fund, which is a long-term investment scheme backed by the Government of India. It is a risk-free deposit scheme that attracts good interest rates. PPF can be opened in public and private sector banks and can also be opened through post offices.

2-Who can open a PPF account in the post office?

 (i)-A single adult. 

(ii) a guardian acting on behalf of a minor or a person of unsound mind. 

(iii) Defense Retired employees above 50 years of age and below 60 years of age can still invest, but the investment should be made within 1 month of the receipt of retirement benefits.

Note:-Only one account can be opened all across the country, either in the post office or any bank.

An NRI cannot open a PPF account but he/she can open an account while residing in India. They can continue it for 15 years, i.e., until the maturity of the account.

3-What documents are needed to open a PPF account?

• ID proof: voter’s ID, passport, driving license, Aadhaar Card, etc.

• Address proof: voter’s ID, passport, driving license, Aadhaar Card, etc.

• PAN card

• Account Opening Form

• 2 recent passport-size photographs

4-What is the minimum and maximum limit for a PPF account?

A depositor can deposit a minimum of INR. 500/-and a maximum of INR. 1,50,000/-in a financial year. Deposits can be made in a lump-sum or in instalments.

5-What is the age limit for opening a PPF account?

There is no minimum or maximum age limit for opening a PPF account in a post office. If it is a minor account, then the account is operated by a guardian until the minor turns 18.

6-What is the locking period for opening a PPF account?

PPF lock-in period is 15 years, but in some cases, premature closure is allowed after 5 years from the end of the year in which the account was opened, subject to the following conditions.

If a person opens a PPF account on January 1, 2021, then he/she can close the account prematurely after March 31, 2026.

For the below mentioned reasons, only premature is allowed.

A-life-threatening disease of the account holder, spouse, or dependent children.

B-For the higher education of the account holder or dependent children.

C-In case the account holder becomes an NRI.

Note: For premature closure, 1% interest is reducted from the date of account opening or date of extension, as the case may be.

7-Is there any tax benefit for a ppf account?

There is a tax advantage to investing in PPFs. PPF provide an income tax deduction under section 80C (up to Rs.1.5 lakh per year).

Interest received on PPF investments is tax-free and there is no tax on the amount received on maturity of the account. 

8-Can we get interest on deposits of more than Rs. 1.5 lakh in a year?

If a contributor deposits more than 1.5 lakh in a year, the excess amount will not earn any interest and the post office will refund the amount.

9-How to close a PPF account.

The account will mature after 15 fiscal years, excluding the fiscal year of account opening.

(ii) On maturity, the depositor has the following options:

(a) Can receive maturity payment by submitting an account closure form and passbook to the relevant Post Office.

(b) can retain maturity value in his/her account further without deposit. The PPF interest rate will be applicable and payment can be taken at any time or can take 1 withdrawal in each FY. 

(c) can extend his/her account for a further block of 5 years and so on (within one year of maturity) by submitting the prescribed extension form at concerned Post Office.

10-How many accounts can be opened in the post office?

A single PPF account can be opened in either a bank or a post office.

11-Can we extend the PPF account post maturity?

PPF accounts mature in 15 years and can be extended beyond that period without depositing any amount. Such an account balance will continue to earn interest till it is closed.

If a PPF account holder wants to contribute after maturity, it can be extended in blocks of five years. To contribute to an extended PPF account, he/she must submit form H within one year of the date of account maturity. If form H is not submitted within one year, the contributed amount will not earn any interest.

In an extended block of 5 years, one partial withdrawal is allowed. The withdrawal should not exceed 60% of the balance amount. The whole 60% amount can be withdrawn in one installment(in a year) or can be withdrawn in yearly installments, but only one instalment is allowed in a year.

Note: A fresh contribution after maturity is not eligible for an income tax benefit. 

12-How is interest calculated by PPF.

PPF interest is calculated on a monthly basis on the lowest balance in the account between the close of the fifth day and the end of the month. Earned interest is credited into the account at the end of the financial year. 

13-Can we open joint name PPF accounts?

No, a depositor can not open a joint PPF account.

14-What happens when account holders die?

If the account holder dies, the account is closed, and the nominee or legal heir(s) is not permitted to make further deposits.

At the time of closure due to death, the PPF rate of interest shall be paid till the end of the preceding month in which the account is closed.

15-Can we transfer PPF accounts to other post offices?

Yes, bank and post office PPF account holders can transfer their PPF account from one post office to another post office.

16-What if I failed to deposit an amount in a year?

If a depositor fails to deposit a minimum of 500/-in any financial year, then such an account becomes discontinued. Such discontinued accounts can be reactivated by depositing Rs. 500 plus Rs. 50 as a default fee for each missed year.

17-Can we withdraw money from our PPF account?

A subscriber can take 1 withdrawal during a financial after five years, excluding the year of account opening. (If the account was opened in 2010-11, withdrawals can be made during or after 2016-17.)

(ii) The withdrawal amount can be up to 50% of the credit balance at the end of the fourth preceding year or the end of the preceding year, whichever is less.(i.e., withdrawal can be taken in 2016-17, up to 50% of the balance as on 31.03.2013 or 31.03.2016, whichever is lower).

17-Can we close the account before the premature?

A PPF account can be closed only if the account-holder dies. However, premature closure is allowed after 5 years from the end of the year in which the account was opened, subject to the following conditions.

-> In the event that the account holder, spouse, or dependent children suffer from a life-threatening illness.

-> In the case of the account holder's or dependent children's higher education.

-> In the event that the account holder's residency status changes (i.e., becomes an NRI).

​(ii) At the time of premature closure, 1% interest shall be deducted from the date of account opening/date of extension, as the case may be.

(iii) Accounts can be closed under the conditions stated above by submitting the prescribed form along with the pass book to the relevant Post Office.

18-Can minors (girls or boys) open PPF accounts in post offices?

There is no restriction on the age limit for opening a PPF account for a minor. However, until the account holder becomes 18, only a parent or legal guardian may operate a minor's PPF account on that person's behalf.

19-How many accounts can be opened in a post office or bank?

Only one account can be opened at either a post office or a bank.

20-How to revive Public Provident Fund Account?

If a depositor fails to deposit a minimum of 500/-in any financial year, then such an account becomes discontinued. Such discontinued accounts can be reactivated by depositing Rs. 500 plus Rs. 50 as a default fee for each missed year.

21-Can we avail a loan from our PPF account?

The PPF account rules allow an individual to take a loan from the account from the third financial year till the end of the sixth financial year. Earlier, the interest charged on the loan taken from the PPF account was two per cent. The applicable interest rate for the loan has been changed to 1%.