PPF is popular form of long term investment which is a deductible U/s 80 C or old Sec 88.
Account opening Rules
- You can open only one single PPF a/c in your name in a bank or post office.
- NRIs and HUFs cannot open accounts, They can continue older accounts till maturity.
- You cannot hold it jointly.
- You can open an account in a minors name as guardian.
- Nomination is a must.
- Nominate using form E.
- Change who u Nominate using form F.
- Banks will demand a Succession certificate if you have substantial funds say above 1 lakh and have no nominee. Claims to be made using Form G.
- Interest and Capital invested in PPF is tax free . Fund invested shall not be liable to attachment under any decree or order of any court in respect
- Interest rates are reviewed yearly and are calculated on prospective basis.
- If you break some rules you will only get ur capital back without interest.
- Loan facility available from 3rd financial year upto 5th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% p.a. However, the rate of interest of 1% p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2011.
- A PPF Year is a financial yr ie April 1 to March 31… Rule 2.(e) PPF Act 1968.
- PPF is a 16 yr commitment ie financial yr of investment is year 0. Calculation of period is not based on the date of opening but FY of opening .
- Say the account was opened in the financial year 1990-1991 (the financial year is from April 1 to March 31). The scheme will mature on April 1, 2006 (1991 + 15 years).
Continuation or Closure post maturity period of 15 years ?
- After the 15 years is over, you can either continue or close the account.
- If one closes the account using form C, the proceeds are Tax free.
Continuation With Further Subscription post maturity/ extended period.
- Continue for a block of 5 yrs using Form H, within one year from the end of the maturity period, otherwise option without subscription will be applied automatically.
- An investor, continuing his account with fresh subscriptions, can withdraw up to 60% of the balance to his credit at the commencement of each extended period in one or more installment, but only one per year.(Notification F.7/2/97-NS IIdt. 9.2.1998)
- For example, say the term of your PPF account is ending on March 31, 2012. The balance at that time in the account is say Rs 10 lakh. You can only withdraw Rs 6 lakh ( 60% of the balance standing to your credit on March 31, 2012) till March 2017.
Continuation Without Further Subscription
- If you wish to continue without investing after 1+15 or 1+20 …yrs. and dont submit form C/H and don’t invest in that account. The option is automatic.
- In case the account is extended without contribution, any amount can be withdrawn without restrictions. However, only one withdrawal is allowed per year. The balance will continue to earn interest till it is completely withdrawn.(Clarification 7 to Clause 9(3A) of the PPF Scheme, 1968)
- The subscriber cannot change over to with-contributions extension. [Notification F.3(6)-PD/86 dt 20.8.86].