Public Provident Fund or PPF is one of the most popular investment avenues used by Indians to save and grow their money for retirement. Afterall, the money invested is guaranteed by the Government of India, there are tax benefits and the gains one makes on it are taxfree. In this video, we shall summarize the many features of the PPF account and uncover some additional details that investors may find useful

Chapters:
00:00 Introduction
00:37 Taxation
01:51 Maturity Period
02:44 Extension of PPF Account
04:09 Contribution
05:31 Eligibility
06:35 PPF Account for Minors
08:00 Interest Rate and Calculation
09:20 Partial Withdrawals
10:54 Closure of PPF Account
12:27 Loan Against PPF
13:56 Loan Decree or Attachment
14:30 Opening a PPF Account

TAXATION

PPF comes with a EEE or the exemptexemptexempt tax status. This means: a) one is entitled to receive tax benefits under Section 80C of the Income Tax Act, b) all interest earned in this account is taxfree and c) all maturity proceeds are exempt from any capital gain or wealth tax

MATURITY PERIOD

PPF has a maturity of 15 years. However, this maturity date is not calculated from the date of opening the account but from the end of the financial year in which the first deposit was made

EXTENSION OF PPF ACCOUNT

Once the PPF account matures at the end of 15 years, the account holder has an option of extending the maturity in blocks of 5 years. These extensions can be done any number of times. During this extension period, the PPF account will continue to earn the prevailing interest rate

CONTRIBUTION AMOUNT

PPF rules require a minimum contribution of 500 rupees per year and allows a maximum contribution of 1,50,000 rupees in a financial year. The government generally changes the maximum contribution limit every few years

ELIGIBILITY

Any Indian citizen can open a Public Provident Fund account in one’s own name. Further, an individual can also open an account on behalf of a minor or a person of unsound mind of whom he or she is a guardian. However, the rules do not allow a joint account or an HUF or an NRI to open a new PPF account

PPF ACCOUNT FOR MINORS

A PPF account on behalf of a minor can be opened by either parents. From a contribution point of view, the maximum allowed limit of 1.5 lakh is an aggregate limit i.e. it includes the contribution of the subscriber and the minor for whom the subscriber is a guardian

INTEREST RATE & CALCULATION

The Public Provident Fund is a fixed income asset class and account holders receive an interest at a rate that is set by the Government of India. The current rate is 7.1%. The PPF interest is calculated every month on basis, the lowest balance of the month from the 5th of the month until the end of the month

PARTIAL WITHDRAWALS

PPF subscribers are allowed to make premature or partial withdrawals after five complete financial years. These premature withdrawals come with certain conditions like a limit of 1 withdrawal per financial year, no loans allowed against the PPF balance and withdrawal limit of 50% on previous year’s balance. Withdrawal rules for an extended PPF account are a bit different

CLOSURE OF PPF ACCOUNT

One can close a PPF account after maturity or post the extension period by submitting an application to the bank or the post office in which the account is held. However, if you want to prematurely close your PPF account, then some conditions need to be complied with and a deduction of 1% is made on the interest calculation

LOAN AGAINST PPF

PPF subscribers are eligible to take a loan against their account balance between the third and the sixth financial year. This loan amount is capped at a maximum of 25% of the preceding two year’s closing balance. These loans are charge ar 1% higher than the prevailing PPF interest rate

COURT DECREE OR ATTACHMENT

A court order or decree cannot be attached to a PPF account and its balance cannot be accessed by lenders for the payment of a debt or liability. However, this rule does not apply to income tax authorities

OPENING A PPF ACCOUNT

One person can open only one PPF account. In case, a subscriber mistakenly opens more than one account, then the additional account will be treated as irregular and will not carry any interest or tax benefit. Opening a PPF account is very easy and a number of banks are doing this online with a minimum contribution of just 500 rupees

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