Doubts & queries are the never ending activities in our mind. Even some time when we get the answer for our query or clarification of the doubt, it creates a corresponding doubt/query. Hasn’t it happened with you?
In this article I am going to try and clarify all the probable queries that come in to our mind with regards to PPF (Public Provident Fund). In case you have any other questions which are not included here you may ask in the comment section I will update it in the article.
How to open PPF Account?
To open PPF account you need to fill up PPF Account Opening Form – A and submit at any nearest authorised Bank Branch/Post Office along with the required KYC documents. You can also apply PPF scheme online. Banks like ICICI Bank, IDBI Bank offer you to subscribe PPF scheme online.
What is the eligibility for investing in Public Provident Fund?
Under Public Provident Fund (PPF) Scheme, 1968 a PPF account can be opened by resident Indian Individuals and Individuals on behalf of minor’s child. This means if you already have a PPF account, you can still open one more in the name of your minor child for which you are the guardian.
Remember! A PPF account can be opened either by the Mother or Father on behalf of their minor Son or Daughter; however the Mother and Father both cannot open PPF accounts on behalf of the same minor. Grand-parents cannot open a PPF account on behalf of minor grand-child; however, in case of death of both the Father and Mother, Grand-parents can open a PPF account as guardians of the grand-child.
Do you mean to say PPF can be opened in minor’s name, is that right?
Yes, an individual can open a PPF account in minor’s name for which he/she is the guardian. Note, here PPF Nomination Form – E is not required to be submitted.
In the event of the death of a guardian, in relation to a minor, should the PPF account in the name of the minor be closed and a new account opened?
In such a case, the minor is treated as subscriber. The amounts in his/her account does not become payable on the death of the guardian. Under Section 8 of the PPF Act it becomes payable only on death of the subscriber. In case of death of guardian the account of minor remains operative and a new account need not be opened. The surviving natural guardian or a guardian appointed by a competent court may continue the account of minor after producing the necessary guardianship certificate.
In the event of the death of the minor subscriber is the balance in the account payable to the guardian?
No, the guardian is not entitled to the payment of the balance. The balance in such cases is payable to the legal heirs of the minor in accordance with Section 8 of Public Provident Fund Act and para 12(6)(ii) of the Public Provident Fund Scheme.
Can HUF (Hindu Undivided Family) open PPF account?
No, HUF can not subscribe to PPF scheme. If you say the application form of PPF have the option to choose HUF, then the answer is; earlier it was available, but not now.
As per the gazette notification published on December 7, 2010 all Hindu Undivided Families (HUFs) had to close their Public Provident Fund (PPF) accounts by March 31, 2011 if they had completed 15 years.
Any accounts opened on behalf of HUF, where 15 years has already been completed by the notification date, such account had to close at the end of the year – March 31, 2011 and the entire amount standing at the credit of the subscriber was refunded after adjustments in respect of any dues from the subscriber.
This amendment in the Public Provident Fund (Amendment) Scheme 2010 was aimed at checking misuse as several people were investing in PPF to earn tax-free return as an individual as well as HUF, an attempt to earn double tax benefits, as an individual can hold only one account.
What is the minimum and maximum amount that can be invested under the PPF Scheme?
The minimum deposit amount is Rs. 500 per annum and the upper ceiling limit is Rs. 1,00,000 per annum.
What is the minimum and maximum tenure of a PPF Scheme?
Once PPF is opened, it should be kept for a minimum period of 15 years till it matures. After maturity you have the option to extend the PPF account by submitting PPF Continuation Form – H at the branch for any period in a block of 5 years after the minimum duration elapses. You can even retain the account after maturity for any period without making any further deposits. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed.
What is number of installment for deposit under PPF scheme allowed in a particular financial year?
Though more than one deposit can be made in a month, but the number of installment deposits should not exceed 12 in a year.
What are the tax benefits from PPF investment?
The amount you invest is eligible for deduction under the Rs. 1,00,000 limit of Section 80C. On maturity, the entire amount including the interest is non-taxable.
Can I contribute to the PPF account of my parent’s and claim section 80C tax benefit?
No, you’re not allowed to claim tax benefits on the contribution made by you in the PPF account of your mother or father.
If a cheque deposited in PPF nearing to the end of the financial years, for e.g. on March 29, 2013 but clearance happens on April 1, 2013, in which financial year deduction can be claimed?
Here the claim can be made for the FY 2013-14. Earlier it was possible to claim as per the cheque deposited date, but from March 29, 2010 the rules has been changed. now the date of realisation of cheque/draft will be deemed as the date of deposit of PPF.
What is the interest rate offered through PPF?
Currently, the interest rate offered through PPF is 8.70% per annum w.e.f. April 1, 2013 which is compounded annually. Interest is calculated on the lowest balance between the fifth day and last day of the calendar month and is credited to the account on 31st March every year. So you can derive the maximum if you make the deposits between 1st and 5th day of the month.
When can I start making partial withdrawals / loans from PPF?
Loan facility is available from 3rd year to 6th year. From 7th year onward, you’re allowed to make partial withdrawals. Also note that once you become eligible for withdrawals, no loans are allowed. The basic difference between the two is that unlike withdrawal facility, loan carries interest and is to be repaid.
Also note, the amount of loan can’t exceed 25% of the balance at the end of 2nd immediately preceding year. For example, if you apply for loan in 4th financial year, then the maximum amount of loan you can avail is restricted to 25% of the balance at the end of 2nd financial year.
After the expiry of 5 years from the end of the financial year in which initial subscription was made, you can withdraw 50% of the balance to your credit at the end of 4th year immediately preceding the year of withdrawal or amount at the preceding year whichever is lower. However, not more than one withdrawal is permitted in one financial year.
What is the process for applying for loans and partial withdrawals?
To avail loans you have to fill up PPF Loan Form – D and for making partial withdrawal from your PPF account, you have to fill up PPF Withdrawal Form – C . Further the application should be accompanied with the passbook.
Can the PPF account be transferred from a Bank/Post Office to another Bank/Post Office?
Yes, as per the PPF scheme of the Government, subscribers can transfer their PPF account from one authorised bank or Post office to another authorised bank or Post office. In such a case, the PPF account will be considered as a continuing account.
Will the account number of PPF get changed when transferred from a Bank/Post Office to another Bank/Post Office happens?
Yes, the transfer entails closing the account at the existing location and opening a new one. In such case new account number will be issue to the subscriber.
Is there any charge on transferring PPF account from a Bank/Post Office to another Bank/Post Office?
No! there is no charge on transfer of PPF account from a Bank/Post Office to another Bank/Post office.
Can I terminate or closed the PPF account before maturity?
No premature withdrawal is allowed for PPF accounts. Only in the case of the death of a subscriber, their nominee /legal heir can close the account by submitting the required documents as guided by the Ministry of Finance.
Can the PPF account be attached?
Yes, the PPF account can be attached by the Income Tax and Estate Duty authorities. The PPF act only gives the account holder immunity against attachment under a decree / order of a court of law. That means PPF can’t be attached by any court.
NRIs QUERY ON PPF (PUBLIC PROVIDENT FUND)
Can an NRI (Non-Resident Indian) open a PPF account?
No, a Non-Resident Indian (NRI) is not allowed to open a PPF account. If you 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.
If an NRI opened a PPF account while he/she was a resident India and subsequently, he/she moved out of India and got the status of NRI while the scheme is yet to mature. Now can the said NRI operate it and make further investments?
Yes, in such case an NRI can continue to make the deposits in the PPF account (which was opened while he/she was resident Indian) till the maturity only. Prior to 2003, NRIs were not even allowed to make contributions into existing PPF accounts, that is, accounts opened before they became NRIs. However, in 2003, a notification (MOF (DEA) No GSR 585 (E) dated 25.7.2003) was issued permitting NRIs to continue investing in existing PPF accounts till maturity
From which account can an NRI invest in the PPF account?
An NRI can use funds in the NRE account or the NRO account to make investments in the PPF account. It is important to remember that the PPF rules require you to invest at least Rs 500 per financial year in the PPF account. If you fail to make the minimum investment in a year or years your account will be considered dormant. Subsequently, when you want to revive the account, you would need to invest Rs 500 for each year that you missed plus pay up a penalty of Rs 50.
Can an NRI extend the term of his/her PPF account after maturity?
No, once the PPF account matures, NRI can’t make further extensions. In other words, post-maturity extension is not allowed to NRIs. If you leave the account unattended post the maturity date? According to the rule book in such cases the account will be considered ‘extended without contribution’ in blocks of 5 years for an unlimited period of time. Extended without contribution means, that the NRI will not have to make the minimum yearly investment of Rs. 500.
Can PPF withdrawals be repatriated?
When NRIs were permitted to continue investing in existing PPF accounts in 2003, the permission was on non-repatriable basis, that is, NRIs could not remit proceeds of PPF withdrawal out of the country. Subsequently the RBI announced a liberalized remittance scheme in 2004 according to which NRIs could remit up to USD 1 million per financial year from the NRO account. Therefore, as of today, you can credit the withdrawal proceeds of your PPF account into the NRO account. And balance in the NRO account can be repatriated abroad up to a limit of USD 1 million per financial year. Of course, you would need to follow certain procedure for such repatriation.
Hope this is enough to get clarified about PPF scheme from all angle. If I have missed anything, do let me know.