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taxguru.in/income-tax/public-provident-fund-ppf-scheme-investment-limit-income-tax-benefit-features.html
CA Sandeep Kanoi
The Public Provident Fund is the darling of all tax saving investments. You invest in it and
you get a deduction on your income. Besides, the interest you earn on it is tax-free. Since it
is a scheme run by the Government of India, it is also totally safe.
PPF refers to Public Provident Fund and is a Long Term Debt Scheme of the Govt. of India
on which regular interest is paid. Any Individual (whether Salaried or Self-Employed or any
other category) can invest in this scheme and can earn a handsome tax-free return on the
same which is usually higher than the return offered by Banks on Fixed Deposits.
a. To open a PPF account, drop by a State Bank of India branch. SBI’s subsidiary banks
can also open accounts. A list of these subsidiary banks is available on the bank’s Web
site.You can even visit the nationalised bank in your neighborhood. Selected branches of
nationalised banks can also open accounts.The head post office or selection grade sub-
post offices also open PPF accounts.
b. You will have to fill up a form. You can take a look or download the form from SBI’s web
site. Along with the form, attach a photograph and submit your Permanent Account
Number. If you do not have a PAN, then furnish an attested copy of either your ration card,
voter’s identity card or passport. When you open an account, you will be given a passbook
(just like a bank pass book) in which all subscriptions, interest accrued, withdrawals and
loans are recorded.
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2. Who can and who cannot not open PPF Account?
a. Who Can Open PPF Account – Any Individual (whether Salaried or Self-Employed or
any other category) can invest in this scheme. HUFs are no more allowed to open any PPF
account
b. Who Can Not open PPF Account- NRI’s are not allowed to subscribe to PPF Account.
However, if someone opens a PPF Account while he is a Resident of India but
subsequently becomes a NRI, he shall be allowed to continue investing in his account. An
NRI can invest up to Rs 1,00,000 per financial year in an existing account, that is, an
account that he opened prior to becoming an NRI. If someone inadvertently opened an
account after becoming an NRI, it is best to close it before it comes to the attention of the
concerned authorities in India.
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The PPF account is valid for 15 years. The entire balance can be withdrawn on maturity,
that is, after 15 years of the close of the financial year in which you opened the account.
Once your account expires, you can open a new one. The only limitation is that you cannot
withdraw it until seven years are completed, after which 50% of your deposits can be
withdrawn, if needed.How to extend PPF account beyond 15 years
PPF account holders have an option of extending their accounts after the 15 year tenure
with or without further subscription, for any period in a block of 5 years. The balance in the
account will continue to earn interest at 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 per
cent of the balance at the beginning of each extended period (block of five years) is
permitted.
A fresh loan is not allowed when a previous loan or interest is outstanding. Interest is
charged at a rate of 2% if repaid within 36 months and at 6% on the outstanding loan after
36 months. The repayment may be made either in lump-sum or in Installments.
b. Tax Free Interest – No Tax is payable on the Interest Earned on PPF Account.
Duration of investment: 5 years for NSC VIII Issue Duration of investment: 15 years
Can be used as a security for mortgage and other purposes Cannot be used for such purposes
Tax benefit under Section 80 ‘C’ available.Maximum limit: Rs Tax benefit under Section 80 ‘C’
150,000 available.Maximum limit: Rs
1,50,000
Interest accrues annually is taxable under Income From Other Interest is fully Exempt
Source and is deemed to be reinvested and therefore allowed
as deduction u/s 80C
Do consider opening a PPF account if you do not have one. You can put in as little as Rs
500 a year to keep it going.
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