PPF – TAX rule (EEE): Investment in PPF is eligible for tax exemption u/s 80C IT act. Income is exempt from tax, and Redemption proceeds are not added to tax
PPF is one of the top-ranked investments all these years because of the following advantages.
- The balance available in PPF account is free from court attachment.
- The principal and interest earned on PPF account exempted from income tax and wealth tax.
- The interest rate on PPF account is now linked to the bond yield in the secondary market and made it even better investment. The PPF interest linked to the bond yield guarantees the returns on investments in line with the prevailing market rates.
- The finance ministry on its notification dated Jun 21, 2016, announced that the PPF account can be prematurely closed for the purpose of higher education of the account holder (including minor accounts). The account holder has to produce documents and fee bills in confirmation of admission in a recognized institution.
- Return on investments: 8% p.a (annual rest) for the quarter October 2018 to December 2018)
Procedure for opening PPF account:
The PPF account could be opened by individuals with an initial deposit of Rs.100.00 in any public sector bank (including State Bank and its associates). PPF account could also be opened in Post office and some of the private sector banks. Nomination facility is available in PPF account are permitted. Premature closure of a PPF account is permissible only in case of death. NRIs and HUFs are not eligible to invest in PPF account.
Guardians may open PPF accounts in the name of minors
Minimum and maximum Investment in a year
The investor has to deposit the minimum of Rs.500 in a financial year. The maximum amount that could be deposited in a financial year is Rs.1.50 lakh. If a depositor fails to deposit the minimum of Rs.500 in a financial year, he can regularize the account by paying Rs.50 penalty in the succeeding year. The entire amount in PPF account is due for payment after completion of 15 years (. Illustratively, if you have opened a PPF account during the financial year 2013-14, the entire amount lying in your PPF account with accrued interest could be withdrawn any time after 01.04. 2029). Interest is calculated on the minimum balance available in the account between 5th and last day of every month.
Continuation of account after maturity
PPF account holders have an option of extending their accounts after the 15-years tenure with or without the further subscription, for any period in a block of five years. The balance in the account will continue to earn interest at the normal rate as admissible on PPF account till the account is closed. In case the account is extended without contribution, any amount can be withdrawn without restrictions. However, only one withdrawal is allowed per year. If you continue the account after 15 years, with continued deposit, withdrawal up to 60 percent of the balance at the beginning of each extended period (block of five years) is permitted.
Loan facility
Depositors can also take a loan if they require it against balance available in the PPF account but it cannot exceed 25% of the balance in the preceding year. Loans could be taken from the third year onwards up till the sixth year. From the 7th year onwards partial withdrawals from PPF account is permitted.
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