Public Provident Fund, which is a long-term investment, its biggest advantage is that is a risk-free and tax-free investment.
The benefits of PPF account, it has 3 major benefits, Frist of all, you can consider it a risk-free investment, because this government backed, Secondly, it is a tax-free investment, that means no tax is applied on whatever investment you make it, this is, when you withdraw money after 15 years, after 20 years maturity, then whatever interest you will earn, or even if you withdraw money in between, then no tax is on whatever interest you earn, Otherwise, all the rest of the investment we say as your fixed deposit is also is risk-free, investment but on that, you have to pay an interest payable tax, There are some tax-free funds too but they have a lock-in period of 5 years, so there is definitely a lock-in period inside the PPF account, but on this you get better interest rate than FD, And thirdly its big benefit is that you also get a tax rebate under section 80C, so within the investment of 1.5 lakhs, they get a rebate from 80C, then you can invest up to 1.5 lakhs inside the PPF account also. And that entire amount, you will get tax rebate under 80C.
About the features, first of all, we will take about the eligibility that who can open a PPF account, so any resident Indian individual can open a PPF account, and one person can open one PPF account, this is you have opened an account in one of your banks, then you cannot open another account by going to another bank, yes you can definitely transfer that account, and secondly, if you want you open an account for a minor, then you can also open that, you can also deposit money inside it as well, but only a parent can operate the minor account, you should also remember this, and thirdly, NRIs ca no longer open a PPF account, by chance, if you have opened a PPF account before having NRI status, then you can operate it for 15 years, but after that it will end automatically, it can’t be extended, that where can you open this account, then you can open it in the post office or any of the authorized bank, any of the popular banks, whether public sector banks are SBI, PNB, private sector banks, ICICI, HDFC bank, Axis bank, or IDBI. You can also open an account inside all of these.
Now the second important feature comes, then how much money you can you put and how can you put it. So you can transfer a minimum of 500 Rs per financial year, and maximum you can do lent up to 1.5 lakhs, if you put more that 1.5 lakhs inside the PPF account the you do not get the interest, the second important thing to know is that if you have also opened a minor account, If you have a child’s account and you operate it, then you can invest 1.5 lakhs by combining both the accounts, and how can you put this money, you can have monthly instalments, quarterly instalments, half yearly instalments or annually instalments, minimum one and maximum 12 instalments you can do here, and how you have to put this money, you can also put it in cash or you can also put it by cheque, you can also put from DD or you can also transfer online.
About the maturity period because it is a long-term investment, so you have to invest it for a minimum period of 15 years, so you have to invest it for a minimum period of 15 years, so your lock-in period is 15 years, after that, you get an extension of 5-5 years, so in a block of 5 years, you can also extend it. This this period of 15 years, it is 15 full financial years, suppose you invest in July in any year, then that financial year will not count, if you invest on 1st July 2023, then the financial year 2023-24 will not count, in its calculations and your actual period will start form 1st April 2024, then period of 15 years which will end on March 31, 2039.
About the interest rate, in today’s date are getting interest rate of 7.1% but it keeps on fluctuating, the interest rate depends on the market, and this is the interest rate is decided by the central government quarterly, so un the last 15 years, this fluctuated from 7.5% to 9% as much we have seen, so you can expect that it will give you more return than FD, as we talked about earlier that it is risk-free and tax-free too, so on this, your PPF definitely has benefits in the long term. And how is this interest rate calculated? First of all, you should know that this is monthly compounding, interest will be charged on the amount you make every month, and on what amount will the interest be charged? Whatever is the minimum amount from the 5 of every month to the last day of every month, on that you will be taxed, so if you have put any amount from you 5th to 30th date, then you will not get the interest for that month, therefore, if you put money in any month from 1st to 5th then you get the interest for that month on that money. What could be its repercussions? Assume that in a financial year you put money towards the end of January or February, so you will get that interest only for 2 months, but if you put your money in April 1 to April 5, then you get the interest rate for the whole year.
How we have to open an account, so there are 2 ways, one, you can visit the branch of any authorized bank, or you can visit the post office, on that you have to submit some documents, documents to be submitted are one is your Form A which is the application of your PPF account, you will fill it and give it, Apart from that your 2 photographs are allied, and the rest of the documents that you have to give for a normal bank account, are also applicable on your accounts such as PAN, address proof, and ID proof. Another easy way is that in today’s date you can also open a PPF account online, If you have already had a bank account in any authorized banks. So, when you go to your online portal then you get the option on that. Because on that your KYC is already done. About Premature Withdrawal, if you get the requirement before 15 years, if you have some urgent requirements then how you can withdraw money, in this you get 2 options.
one is you have the option of Loan, you can take a loan form the 3rd financial year to 5th financial year since opening of your PPF account, on that, the interest rate that charged is 2% more than the interest you are getting on the PPF account, and your requirement comes after 6th years, if your requirement is form 7th years to 15th years.
In that case, you get the facility of partial withdrawal, 7th year onwards, you can do partial withdrawal.
Apart from this, let us know about other important details. PPF account cannot be attached against any debt and liability. Suppose you have got a lot of debt, then even the court will not give this direction, that you pay by withdrawing the money form the PPF account. Even if you are facing bankruptcy. The PPF account is always there for you for the long term. So that your retirement goals are fulfilled, PPF account is kept for marriage, education, serious illness, so it cannot be attached against any dept and liability. And there is a chance that you are not able to maintain the PPF account.
And you have to fill in the minimum 500 per financial year with. Even if you are not filling it, then your PPF account becomes inactive and if you want to revive it, so you can do that, you just have to pay a small penalty, for any financial years for which you have not made you minimum payment 500 rupees, which you have to pay for the financial year, you have to pay that up first. Consider that your account has been inactive for 5 years, so 500 X 5, i.e., Rs. 2,500 you will have to fill, plus you will have to pay a penalty of Rs. 50 per financial years. So Rs. 250 you will have to give.
Suppose you to close the PPF account Premature, you do not want to maintain it even 15 years, so in this case you can close it Prematurely in only 2 conditions, first of all, you should have at least 5 years, you can close only after 5 years, and accordingly, you can close it within 2 conditions only. Firstly serious illness of any family member, it if happens then you have to put some documents and you will be able to close the PPF account. And the second one is Higher Education of Account Holder. Higher education means, if you yourself are paying for higher education, then you can close. Or if you are operating an account for any of your children operating for a minor then if the account holder of that goes for any higher education, then you can still close the account. And the second thing you have to keep in mind is that, if you close Premature then you get a penalty of 1% on the interest rate, so if suppose you had a an interest rate of 7.1%, then you will get only 6.1%.
But, if you want to transfer that account, then you can definitely do it. In any other branch of any bank or if you ask to change bank then the bank can also be change, and if you ask to transfer the PPF account inside the post office, then that is also possible.
