Key Features of Public Provident Funds

 

Key Features of Public Provident Funds will help to take the decission about the PPF investment. Launched under the Public Provident Fund Act, 1968, PPF is very popular in terms of small saving investment in India.  As per the scheme, investments in smaller and unequal units can be deposited to PPF account, which would enjoy a high rate of interest along with complete tax exemption under section 80C of income tax.

Key Features of Public Provident Funds

Key Features of Public Provident Funds (PPF)

A PPF account can be opened in any public or private banks along with all the branches of post offices. In the article we have to cover all the basic Key Features of Public Provident Funds.

  • Who can open a PPF account?

Any Indian national can get a PPF account opened under his/her name.  PPF account can also be opened for minors, with legal guardian being the operator of the account.

  • Amount of Investment

Since, PPF is a small saving scheme; the account holder can deposit an amount as small as Rs 500 in their account.  The maximum cap on which the account enjoys tax exemption is Rs 1.5 lakh.

If the minimum amount of Rs 500 is not made in any given year, the account would consequently be treated as a discontinued account.  Such account can only be made live again by paying a penalty of Rs 50 for each year the account was defaulted.

  • Maturity Period of PPF accounts

A PPF account normally has a maturity period of 15 years, after which the proceeds would be handed over to the account holder.  However, if the account holder wishes to continue the account, he/she can do so in multiples of five years or so.

  • Rate of Interest in PPF account

This is the very important Key Features of Public Provident Funds. Government of India is responsible for deciding the rates of PPF from time to time, based on how the overall economy is growing.  At present, PPF offers a rate of interest of 8.7%, which happens to be the highest among all other forms of small saving.

The interest on PPF account is compounded annually and is calculated on the minimum balance of the account as on the 5th of every month.

  • Nomination facility available in PPF Account

A PPF account holder can nominate a number of people for his/her PPF account.  He/she is required to fill Form E in order to nominate someone for their PPF account.  If the account holder wishes to change the nomination at any stage during the scheme, he/she can do so by filling Form F and submit the same to their respective branch. For more information you can read the article Nominations In Public Provident Fund

  • PPF account is Transferable

You can get yourself a PPF account in any of the private sector or nationalized banks along with almost every branch of post offices.  Moreover, your account can be transferred from one bank to another and from one post office to another along with from a bank to a post office and vice versa.   Moreover, the account can be transferred from one place to another in terms of location as well. You can also read the article is PPF transferrable because this is the very important Key Features of Public Provident Funds.

  • Loan against PPF account

Loan facility is available against PPF account, subject to fulfilling terms and conditions.  To avail loan under PPF account, the account holder needs to submit Form D to his/her branch.  The account holder is eligible for a loan for amount up to 25% of the amount accumulated at the end of 2nd year.

For loan against a minor account, the guardian has to mention under writing that the amount withdrawn as loan would be used for the benefit of the minor. The loan can be paid in convenient installments and once the first loan is complete is then that the account holder can apply for the next loan on same conditions.

  • Withdrawal Facility in PPF

After the fourth year, the account holder is eligible for partial withdrawal from the PPF account.  However, the withdrawal can only be made once in a given financial year and the amount of withdrawal should not exceed 50% of the accumulated amount in the account. For more you can read the article Withdrawal Rules in PPF

In case the withdrawal has to be made from the minor’s account, the guardian of the account has to declare in writing that the money withdrawn would be used for the benefit of the minor. This is also very important Key Features of Public Provident Funds.

  • Premature closure of PPF account

Premature closure of PPF account is not permitted.  The account can only be closed in case of death of the account holder/depositor.  In case of death of the account holders, the nominees would get the proceed amount and if there are no nominees against the account, legal heir of the account holder is eligible to get the maturity proceeds. You can also read Premature closure of PPF Account

  • Closure and maturity of PPF account

The term of PPF account is 15 years, on which the money matures and account can be closed and money withdrawn.  However, if the account holder wants to continue with his/her account, he/she can do so and extend the account in multiples of 5 years.  In that case, the account would continue to get the same interest and tax benefits as earlier.

  • Tax Benefits of PPF account

One of the major reasons why a lot of people prefer PPF as a mode of long term investment is that it offers a complete tax benefit package.  PPF enjoys EEE exemption under income tax.  The contributions, the interest earned and the maturity amount, all are fully exempted under section 80C of Income Tax.

Tax benefit can be further claimed after 15 years of the PPF account, when the account matures, but only after the account holder has extended the term on the account in writing.

Last but not the least; PPF certainly remains the number one choice for many in India who are looking for a promising investment scheme along with tax savings.  Along with income tax exemptions, the entire amount accumulated in PPF account is also exempted from Wealth Tax.

In our article Key Features of Public Provident Funds we have to discuss all basic Key Features of Public Provident Funds. If you have any question so read the article Public Provident Fund PPF FAQ or send us the comment.

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