PPF account: Interest rate to withdrawal. 10 rules that investors should know


 









Public Provident Fund (PPF) is a government-backed savings-cum-tax saving scheme that enables an investor to accumulate a retirement corpus while saving on annual income taxe. PPF account is hundred per cent risk-free and it is one of the limited saving schemes that can beat 6 per cent average annual inflation growth. Currently, PPF interest rate is at 7.1 per cent but there are some other important rules that an investor should know.

1] PPF interest rate: Currently, PPF interest rate is 7.10 per cent. PPF interest is calculated on monthly-basis but compounded annually.

2] PPF interest calculator: PPF interest is given on the minimum PPF account balance available between 5th to last date of the month. So, if a PPF account holder deposits from 1st to 4th date of a month, then the investor is eligible for PPF interest of that month as well. So, for monthly PPF investor it is advisable to invest from 1st to 4th of the month whereas for lump sum annual depositors, they should deposit from 1st to 4th April and get PPF interest for the entire financial year on their deposit.

3] PPF deposit: A PPF account holder needs to deposit at least ₹500 in one financial year to keep its account active whereas any investment above ₹1.5 lakh in single financial year won't get PPF interest rate on the surplus deposit. That means, a PPF account holder can deposit minimum ₹500 to maximum ₹1.5 lakh in one's PPF account.

4] PPF account rules: One person can have only one PPF account and joint account opening is not allowed in the case of PPF account.

5] PPF withdrawal rules: A PPF account holder can fully withdraw the PPF account balance only upon maturity i.e. after the completion of 15 years. However, in the case of financial emergency, the scheme permits partial PPF withdrawal from 7th year of account opening. Premature withdrawal is allowed after completion of 4 years of PPF account opening.

6] Income tax benefit: As mentioned above, any PPF deposit above ₹1.50 lakh in one financial year is neither eligible for PPF interest rate nor for income tax exemption. As per Section 80C of the Income Tax Act, a PPF deposit up to ₹1.50 lakh in one financial year can be claimed for income tax benefit. This tax benefit under Section 80C has to be claimed while filing income tax return (ITR).


Likewise, PPF maturity amount is 100 per cent tax exempted at the time of withdrawal.

7] How to activate PPF account: Failing to deposit minimum ₹500 in one financial year leads to freezing of PPF account. To activate PPF account, there is penalty of ₹50 per year.

8] Security against bankruptcy: A PPF account can't be attached by a person to pay off debt, not even by order of a court decree.

] PPF account extension: On completion of 15-year maturity period, an account holder can extend one's PPF account in block of 5 years for unlimited number of times.

10] Loan against PPF: An account holder is eligible for loan against PPF account between the 3rd and 5th year of account opening. The loan amount can be a maximum of 25 per cent of the 2nd year immediately preceding the loan application year.

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