Small Savings Schemes Rollover

Public Provident Fund (PPF) scheme is a long term investment option which offers rate of interest and returns on the amount invested. The interest earned and the returns are tax free under income Tax. One has to open an PPF account under this scheme and the amount deposited during a year will be claimed under section 80C deductions.

Essentials

•    Tenure: The PPF has a minimum tenure of 15 years, which can be extended in blocks of 5 years as per your wish.
• Investment Limits: Minimum investment of Rs 500 and a maximum of Rs 1.5 lakh for each financial year. Investments can be made in lump sum.
• Opening Balance: The account can be opened with just Rs 100. Annual investments above Rs 1.5 lakh will not earn interest and will not be eligible for tax saving.
• Deposit Frequency: Deposits has to be made at least once every year for 15 years.
• Mode of deposit: The deposit can be made either by way of cash, cheque, Demand Draft or through an online fund transfer.
• Nomination: A PPF account holder can designate a nominee for his account either at the time of opening the account or subsequently.
• Joint accounts: Opening an account in joint names is not allowed.
• Risk factor: PPF is backed by the Indian government, it offers guaranteed, risk-free returns as well as complete capital protection. The element of risk is minimal.

Eligibility

• Any Indian citizen can invest in PPF.
• Minor also is eligible but it will be operated by guardian.
• NRIs and HUFs are not eligible to open a PPF account.
• If NRI's account was opened before leaving it'll be active for 15 years only.

How to open a PPF account?

A PPF account can be opened with  Post Office or with any nationalized bank like the State Bank of India or Punjab National Bank, etc. Now a days, even certain private banks like ICICI, HDFC and Axis Bank are authorized to provide PPF facility. You need to submit the duly filled application form along with the required documents i.e. the KYC documents like identity proof, address proof, and signature proof. Post submitting these documents you can deposit a prescribed amount towards the opening of the account.

Frequency of Deposit

• Monthly
•   Quarterly
•   Semi annually
•  Annually

Interest Rate

The current interest rate is 7.1% p.a. (for the quarter 1 October 2020 to 31 December 2020, until 31st March 2020 it was 7.9% p.a.) that is compounded annually. The Finance Ministry set the interest rate every year, which is paid on 31st March. The interest is calculated on the lowest balance between the close of the fifth day and last day of every month.

Loan against PPF

• You can take a loan against your PPF account between the 3rd and 5th year.
• The loan amount can be a maximum of 25% of the 2nd year immediately preceding the loan application year.
• A second loan can be taken before the 6th year if the first loan is repaid fully.

PPF withdrawal

• One can fully withdraw the PPF account balance only upon maturity i.e. after the completion of 15 years. (Principal + Interest)
•   In need of funds  before 15 years, the scheme permits partial withdrawals from year 7 i.e. on completing 6 years, up to 50% of the amount that is in the account at the end of the 4th year (preceding the year in which the amount is withdrawn or at the end of the preceding year, whichever is lower).
•   Withdrawals can be made only once in a financial year.