The Public Provident Fund (PPF) plan has always been India’s most popular investment. This is the instrument for you if you want a tax exemption on your investment, non-taxable interest, and a tax-free maturity amount.
With these three obvious benefits, it’s no wonder that nearly every citizen in the nation has opened a PPF account and contributes to it on a yearly basis.
But do you truly know everything there is to know about how to open PPF accounts online? Are you aware of the variations in interest rates in the PPF throughout time? Do you realize that this money can never be connected to any debt or liability, implying that it is yours forever? There are several ways of getting the most out of your PPF account and here we discuss them in detail.
Let’s get down to business!
PPF is an abbreviation for Public Provident Fund, which is a government-backed long-term retirement savings mechanism.
With a 15-year lock-in period, this is India’s longest investment horizon. If you want a secure investment with a fair rate of return, tax advantages (deduction and tax-free interest), and a lengthy investment objective, the PPF is for you. Because your money is locked up for 15 years, it is a disciplined investing route. PPF also provides loans against the account, which may be used for family events such as weddings or completing your children’s education, among other things.
The primary characteristics are as follows:
a. the 15-year agreement,
b. Section 80C E-E-E status (tax exemption on investment, interest, and maturity).
c. a minimum investment of Rs. 500 per year and a maximum investment of Rs. 1 lakh per year (w.e.f 01-Dec-2011)
d. The interest rate gets released annually and is no longer set at 8% p.a.
Get Into the Basics of PPF
While it is now simpler than ever to register a PPF Account, there are a few things that every investor should be aware of before investing. The following are four crucial PPF plan details:
1. PPF Maturity
In India, the maturity time for PPFs is 15 years. After completing this period, you can extend it in 5-year increments. The PPF plan regulation states that the last day of the fiscal year is treated as the date of commencement, regardless of the month of the fiscal year in which you invested.
For example, if you began investing in a PPF in October 2018, the computation will begin on March 31, 2019. This implies the 15-year maturity date will be April 1, 2034.
2. PPF Account Interest Rate
The PPF interest rate is closely tied to 10-year government bond rates and so fluctuates on a regular basis. Currently, the yearly interest rate on your PPF investment is 7.1%. The interest is compounded annually and is not paid to the investor.
As a result, it is one of the safest solutions for accomplishing long-term financial goals and retirement planning.
3. Tax Benefits
One of the reasons for PPF’s tremendous appeal in India is the tax advantages it provides. PPF is tax-exempt (Exempt-Exempt-Exempt). Contributions to a PPF program in India are tax-deductible under Section 80C of the Income Tax Act. The interest you earn over the course of 15 years is completely tax-free.
In other words, at the conclusion of the maturity term, all proceeds, including your investment and interest collected, are tax-free.
Loan option is also accessible with PPF account between the third and sixth financial year of your investment, according to PPF system guidelines. The first loan can be obtained three years after the initial deposit. The loan amount can be up to 25% of the amount invested by the end of the second year.
After repaying this loan, you may apply for another loan before the end of the sixth year of your investment.
Did You Know?
Fact # 1 – PPF enjoys the EEE Status.
What does that mean? This means that the investments made to your PPF account are Exempt, Exempt, Exempt. In simple words, The maturity amount, as well as the total interest generated throughout the investment term, are tax-free.
Fact # 2 – Investors should always deposit their amounts before or on the fifth of each month, according to the PPF guideline.
The interest rate on PPF accounts is computed based on the minimum amount in the account between the fifth and final day of the month. Depositing the amount on the fifth day would allow investors to benefit from the interest advantage for that month
Fact # 3 Join ownerships are not allowed
We all know that only a resident individual may create a PPF account, but keep in mind that joint ownership is not permitted. A minor, on the other hand, can create a PPF account with the help of a guardian.
Indian Residents or NRIs: Who Can Open a PPF Account Online?
· An NRI is not authorized to open a PPF account in India.
· A resident Indian, on the other hand, can create a PPF account and later become an NRI. Such a person can keep the account open till it matures.
· When the PPF account reaches maturity, the NRI is obligated to close it. There aren’t any exceptions.
· As a result of the above statement, an NRI cannot extend a PPF account. They, too, cannot let it remain idle. The only option available is to close the account.
· If the NRI does not follow the conditions outlined above and leaves the account open, no interest will be paid.
· If an NRI continues to make PPF payments without informing their bank of their changed status (viz. from a resident to a non-resident Indian). After maturity, no interest will be paid on contributions. All banks frequently examine KYC paperwork, notifying them of the customer’s residency status.
How to Check PPF Account Balance?
There are 2 ways to check your PPF account balance –
Offline method: Go to the nearest bank branch where you started your PPF account.
Online method: You may obtain all of the information by signing in to your bank account. Net banking may be used to examine the current balance, the interest earned, and the deposits made.
Urgent Need for Funds? Know About Premature Withdrawals
|Type of withdrawal||Duration||Grounds||Amount that can be withdrawn|
|After maturity||After 15 years||No criteria||The full amount + interest|
|Premature closure||After 5 years||For education or medical treatment||Up to 50% of the balance available|
|Partial withdrawal||After 6 years||No criteria||Partial Withdrawal is allowed|
You are allowed to withdraw a portion of your PPF funds under the plan. However, if you want to withdraw a portion of your PPF, keep the following considerations in mind:
· After 5 fiscal years from the date the PPF account was created, a partial withdrawal option is available.
· You may withdraw up to 50% of the available amount following the end of the fourth fiscal year.
· In a fiscal year, only one partial withdrawal is permitted.
· Individuals must include the passbook with their application form.
· Only once the bank or post office has verified all of the information will a partial withdrawal be permitted.
· The sum withdrawn is not subject to taxation.
Word to Remember
PPF is one type of investment vehicle that falls under the Exempt-Exempt-Exempt (EEE) classification. In other words, all PPF contributions are tax-deductible under Section 80C of the Income Tax Act. It should be noted, however, that the maximum contribution to a PPF cannot exceed Rs.1.5 lakh in a single fiscal year.
Furthermore, at the point of withdrawal, the accumulated sum and interest are tax-free. It should be noted that a PPF account cannot be closed before maturity.
A PPF account, on the other hand, can be moved from one point of designation to another. However, keep in mind that a PPF account cannot be canceled prematurely. Only in the event of the account holder’s death may the nominee file for the account to be closed.
No, a combined PPF account cannot be opened. A person can only have one account.
No, submitting a PAN number is not required while starting a PPF account.
Yes, parents and legal guardians can create a PPF account on a minor’s behalf. However, required documentation must be presented at the time the account is opened.
No, you cannot close your PPF account before it matures. If the account holder passes before the account matures, the account might be closed. If the account holder is unable to make payments for a period of five years owing to medical or financial difficulties, the account is deemed prematurely closed.
Yes, changes to nomination can be made using a PPF account. For a change of nomination, Form F must be completed and submitted.