What is PPF?
The Public Provident Fund [PPF] has the tenure of 15-year, which is extendable in every five years. This account can be opened directly in the bank or has the option it opened via his company or the organization he/she is working in. In fact, various banks offer online opening of PPF account nowadays as the process here is less time-taking. Also, there is no age limit to open a Public Provident Fund account and but a person can’t have more than one PPF account in the same name.
PPF Account for Tax Benefit
The principal amount in the PPF account helps you avail the tax deduction under Section 80C of the Income Tax law. Similarly, the interest you earn on this saving is also relieved from tax under Section 10 of the Income Tax.
Tenure for Deposition of Money in PPF
The account holder can deposit money 12 times in a year it means that you can add money to the PPF account once in every month. But, the deposition of cash must take place before the 5th day of the month. This makes you eligible to earn interest for a complete month. It is so because the interest can be earned on the minimum balance at the credit of an account from the 5th day upto month end. Also, the investors have the option to deposit Lumpsum amount at the commencement of the financial year. This money deposition helps in managing the financial funds for the entire year.
Things to Consider before Opening PPF Account
In PPF account the investment is simple and has nothing to do with equity which means one need not to think much about the behavioral pattern stock market. The Central Government sets the interest rate that people avail on PPF returns which are reviewed at the start of every quarter. The interest rate was 4 percent per annum in the year 1968-69 which was increased to 12 percent in 1986 and was same till the year 2000. The rate is 7.8 percent for the financial year 2017-18.
The savings in PPF starts with the minimum amount of Rs 500 which can exceed upto rupees 1.5 lakh for one financial year. In case of a minor account holder, the guardian has to open PPF account on his or her name and the deposition limit remains similar to 1.5 lakh rupees.
In case, the total deposited money accounts more than 1.5lakh rupees then it is said to be irregular and the account holder will be deprived from availing tax benefit under Section 80C.
PPF in the name of a Minor
The parents are eligible to open PPF account on behalf of a minor child. Although only one of the parents can open this account which means either mother or father can open a PPF account. Here the grandparents are not allowed to open PPF account on behalf of their grandchildren until they hold the legal custody of children which is transferred to them post death of their children and the parents of their grandchildren.
Number of accounts
A person cannot hold two PPF accounts in the same name. The account holder is applicable to open one Public Provident Fund account on his or her name in the bank or in post-office. In case, the individual holds two accounts then the second account is said to be irregular and will not earn interest on this account until both accounts are merged.
The account holder has to send a written application to the Ministry of Finance (Department of Economic Affairs) for seeking the merging approval.
Premature closure of PPF account
Earlier, the withdrawal of money from the PPF account was not easy. But now a person can withdraw an amount from the PPF account when necessary which includes amount withdrawal after five years and before the maturity date of PPF. The approval for money withdrawal depends on factors like the treatment of serious ailment or a life-threatening disease of the account holder. A person can withdraw money in case his spouse or dependent children/parents are suggested to have medical assistance.
The account holder is eligible to withdraw money from the PPF account in case his or her ward has to get admitted in government recognized institution for higher education. You will get withdrawal request approved only after producing the required documents, fee structure and other important papers.
A person has to fill in the nominee name while filling the account opening form. This is because the Form-A includes the section to add nominee name the form does not offer separate form to add legal nominee at a later stage.
The PPF account is levied to be attached to the Income Tax authorities and in case the person has incurred debt amount from any financial institution. Also, no other person can access details of your PPF account in order to claim his/her debt incurred by the account holder.
The Public Provident Fund is best for investment purpose in case you want high returns in a fixed period of time. This account proves helpful especially when you have planned long-term goals which require funds to accomplish them.