Public Provident Fund (PPF) is one of the popular long-term investment schemes, established by the Ministry of Finance (MoF) of India in the year 1968. The rate of interest for PPF was 8.7% for the financial year 2015-2016, which has been revised to 8.1% in the Union Budget 2016 for the financial year 2016-2017. Read through to learn more about PPF and get answers for the most frequently asked questions about this popular investment vehicle.
- Can I use my inactive PPF account?
One person cannot hold or operate more than one PPF accounts against his or her name. Even if an account has been inactive for a period of time, the account holder can use the same account, provided he pays a penalty of INR 50 for every inactive year, to the holding branch. For example, if the account was inactive for 2 years, the account holder has to pay INR 100 to start reusing the account. Also, the account holder has to make a minimum deposit of INR 500 for every inactive year plus the current year of activation. For instance, if the account was inactive for 2 years, the account holder has to deposit minimum INR 1,500 in total.
- Can I continue to earn returns on my inactive account?
No, interest is not generated on for inactive accounts. If the account holder revives the account, interest is then calculated as per the available balance during the time of revival.
- Can I claim tax deductions for two PPF accounts, which I hold on my name and my child’s name?
Amount up to INR 1.5 lakhs against PPF account can only be claimed each year under Section 80C of the Income Tax Act. This maximum investment cap applies to the combined contributions made to your PPF account and your minor child’s account.
- How is the annual interest calculated for PPF accounts?
Total investments made until or on the 5th of every month is considered for interest calculations of that month. For example, if the account holder has INR 10,000 by 5th of September and he adds INR 20,000 on 10th September, interest is calculated only for INR 10,000 for the month of September and INR 20,000 (which is added later) will be considered for interest calculation for the next month i.e.. October.
- Is it mandatory to withdraw my investment amount at the end of 15-year tenure?
No, it is not mandatory to redeem the funds on maturity. If the investor wishes to extend, the account can be continued for more 5 years per extension. However, extensions can continue with or without the need for any deposits. The account holder will continue to receive interest even during the extension period.
- If I die before the maturity period, what will happen to the money in my PPF account?
Nominees or legal heirs of the PPF account holder can claim the money in the account, in case of the account holder’s death. If more than one nominee is named, the amount will be distributed proportionately between them. To avoid disputes and for clear transfer of funds, it is advisable to clearly mention the name of the nominees while opening the PPF account.
In conclusion, it is advisable to make investments following a thorough research concerning the interested investment channels. Approach expert planners from online advisories like ArthaYantra to get a holistic and personalized financial plan. Identify the suitable investment channels that suits your goals. Because, not every investment vehicle suit for everyone’s needs, but varies from person to person based on the financial goals, income and risk appetite. Plan well and fulfil all your money goals of life!