PPF scheme introduced by Central Govt is a very popular and easy to invest scheme. The scheme enables the members of public to make contribution to the fund and obtain income tax benefit. Central Govt has started this scheme to provide old age income security to the workers in the unorganized sector and for the self employed individuals. PPF account is effective tax saving vehicle which gives you amazing return for the sunset years with zero risk.
Who is eligible??
- Individuals on behalf of minor
The account can be opened with Rs. 500 minimum deposit with any branch of State Bank of India, branches of few nationalized banks and at any head post office or general post office.
Minimum and maximum amount of investment:
The minimum amount of deposit in PPF account is Rs.500 and the maximum amount is Rs.100000 in one while financial year. This amount can be deposited in lump sum or in installment. If account holder chooses to deposit the amount in installments then only 12 installments are permitted.
Duration of the PPF account:
PPF account has its expiry only after completing 15 years from the the date of opening of its account, means account holder can withdraw the whole amount on its expiry only. However one can extend the duration by applying for further time period of 5 years. After expiry of the account if account holder retains the balance as it is without investing further, it will earn interest till withdrawal.
Rate of interest:
Interest rate on PPF is currently 8.8% (w.e.f 01-04-2012) earlier it was 8.6% from Nov’ 2011 and 8% before that. Interest is calculated on the minimum balance between the 5th day and the end of the month.
Loans & Withdrawals:
- A loan can be taken against up to 25% of the balance at the end of the first financial year from the third to sixth year. Next loan can be taken on repayment of previous loan only. So if the account is opened in 2007-08 the loan can be taken during financial year 2009-10
- Account holder can withdraw amount from his PPF account during any one year from six years. The maximum amount he can withdraw is 50% of the amount standing to his account;
1. at the end of 4th year or
2. at the end of previous year in which withdrawal is sought to be made whichever is less.
- After the initial 15 year periods if you choose to extend the account and just maintain the balance, you can withdraw the entire sum in a lump sum or in installments. If you withdraw money in installments, you can not make more than one withdrawal a year. If you continue to deposit money in your account you can withdraw up to 60% of the balance to your credit at the beginning of each extended period (block of five years).
- Investment made in PPF is eligible for deduction u/s 80C.
- Interest on PPF is totally exempt from tax.
- Amount standing to the credit of PPF account is fully exempt from wealth tax.
- Deposits in the name of spouse and minor are also eligible for deduction u/s 80C
This article is written by Mr. Mayank Gupta who blogs at NineMillionDollars.com and writes on topics like best mutual funds and Gold ETF
Mr Pankaj, 2 queries from my side:
Will there be any difference from safety standpoint if i open PPF with ICICI bank vs. Post office.
2nd thing on Tax benefit u/s 80C – Can Mother claim PPF deposited in account of her Major child or minor grandchild
There won’t be any difference from safety standpoint with ICICI bank PPF and post office PPF account.
Mother/Grandmother can claim tax benefit for PPF deposited in major/minor child/grandchild if she paid that amount from her sources. Total deduction limit would be 1 lakh only for her u/s 80C.
I understand Mother can pay PPF or minor children, but such facility not allowed for Grandparents to grandchildren.
ICICI bank FAQ says “Grand-parents cannot open a Public Provident Fund (PPF) account on behalf of minor grand-child; however, in case of death of both the Father and Mother, Grand-parents can open a Public Provident Fund (PPF) account as guardians of the Grand-child.”
Also can u clarify whether a child can pay PPF for parents and claim such paymnet under child’d 80C deduction.
Grand-parent can only deposit amount in PPF account of their grandchildren if he/she is legal guardian of minor (as per tax rules, this would only happen in case none of the parents is alive).
Child cannot pay PPF for parents and claim deduction. Only payment to a minor account (apart from his own) can be claimed as deduction.
I had opened PPF account with 30K through ICICI when the interest rate was 8%.
1) Is the revised interest rate of 8.8% applicable for this amount?
2) Can I add money to same account? If yes, will the revised interest rate be applicable? In this case, expiry date (15 years) will be different for each amount I add every year. right?
Thank you very much for your help! God Bless You!!
1. Revised interest rate of 8.8% on PPF would also applicable to ICICI PPF account too.
2. You can add more amount to same account. PPF account maturity is counted from date of opening account. Even if you deposit some amount in 15th year, that can also be taken out next year due to end of PPF account term.
My mother is earning pension around 17k/month, is there any exemption available on the pension amount, her age is 62 Yrs
There is no exemption available on pension amount. It would be treated as salary income.
But as per pension is only 17k/month, her taxable income for year would be less than 2.5 lakh (non-taxable range for senior citizens). Hence no income tax would be payable.
Sorry for posting in the wrong column. My question is about TIER-II account in NPS. I have activated my TIER-II account and I already have a TIER-I account. I am a Central Govt employee. Kindly, I want to know how to withdraw money from the TIER-II account.
Please let me know the procedure.
You need to fill UOS-S12 form and submit it into POP-SP office in order to withdraw from Tier II account.
You can download this form from this page: http://www.pankajbatra.com/india/new-pension-scheme-nps-india/
Is it that we have to deposit the same amount in the PPF account every year or can we deposit as per our wish and availability of funds? (varying every year)?
Example: If I deposit 10,000 this year do I have to deposit minimum 10k every year?
You need not to deposit same amount every year.
One year you may just deposit Rs 1000 and another year Rs 1 lakh, it won’t be an issue.