The Public Provident Fund (PPF) scheme, created in accordance with the Public Provident Fund Act of 1968, is a long-term investment plan endorsed by the Government of India. It provides security with attractive interest rates and returns that are entirely tax-free.
Income tax benefits
PPF interest income is completely exempt from income tax. The balance of a PPF account is entirely exempt from wealth tax.
PPF loan facility or partial withdrawal
After the fifth year, withdrawals are permitted each subsequent year. The maximum withdrawal is 50 percent of the account balance at the end of the fourth year immediately prior to the year of withdrawal, or at the end of the year before, whichever is smaller, less any outstanding loans that he may have taken out.
In the third fiscal year following the fiscal year in which the account was opened, the depositor is qualified for a loan. At the end of the first financial year, the account’s credit balance might be up to 25% of the total amount that could be borrowed. Loan must be repaid in 36 months.
HUF and Non Resident Indians are not eligible to open PPF accounts. A lump sum payment or 12 monthly instalments are both acceptable for subscriptions with a minimum of Rs. 500 and a maximum of Rs. 1,50,000. The account has a 15-year term, but it may be extended by one or more blocks of five years without incurring interest loss upon writing request made within a year before the account’s maturity date.
A PPF holder can nominate one or more nominee names. The percentage of each nominee’s share, which should equal 100% if the person wish to nominate more than one individual, must be stated. Additionally, if a minor’s name was used to open the account, a nomination facility is not offered.
When is an PPF account treated as discontinued
If customers don’t pay the required minimum of Rs. 500 in a given fiscal year, their account will be deemed discontinued. In these situations, unless the account is revived, the subscriber will not be permitted to take out a loan or make a partial withdrawal. The subscriber is only allowed to have one PPF account open at a time.
According to the , “A subscriber to a discontinued account may revive the discontinued account by payment of Rs. 50/- aspenalty for each year of default along with arrear subscription of Rs. 500/- for each year.”