Public Provident Fund

 

Public Provident Fund

 

 Public Provident Fund is a scheme of Central Govt. framed under the Public Provident Fund Act, 1968. The scheme came into force w.e.f. 01.07.1968. This is a government backed, long term small savings scheme. The account under this scheme can be opened in selected branches of banks and post offices.

Eligibility:  A Resident Indian individual on his behalf or on behalf of a Minor or a person of unsound mind of whom he is a guardian is eligible to open a PPF account.  The account on behalf of a minor can be opened either by the father or mother of the minor only and not by both.  In case of death of both father & mother, grand parents can open the account as guardian of the grandchild.  Only one PPF account can be opened by the individual, except an account that is opened on behalf of a minor or person of unsound mind.  Opening of PPF account by NRI (Non-Resident Indian), HUF (Hindu Undivided Family), Person of Association (POA), Trust or in Joint Name is not permitted. Also, Joint account shall not be opened under this scheme. Documents required to open a PPF account:  PPF Account opening form  In case of existing accounts, Aadhaar number is to be obtained (If Aadhaar number is not available, proof of enrolment is to be obtained)  Nomination Form  Passport size Photograph  Copy of Pan Card / Form 60-61  ID Proof and Residence proof as per Bank’s KYC norms.

Monetary Limit:  The minimum deposit is Rs. 500 and maximum limit is Rs.1, 50,000/- can be invested in a financial year under this scheme.  The combined deposit amount in the PPF account of an individual and in the account operated by this individual on behalf of a Minor together cannot exceed Rs.1,50,000.  If the subscription is done through Cheque / DD, the date of realization will be the date of deposit.

Duration:  The term of the account is 15 financial years, excluding the financial year in which the account was opened.  In case of death of the account holder, their nominee/legal heirs can close the account before maturity.

 Extension of Account: After maturity of the account, the account holder has three options: ✓ First, the account can be closed immediately ✓ Second, the account can be continued without deposits for any period ✓ A customer can extend the tenure of the PPF investment for a block period of 5 years at a time beyond the maturity period by submitting account extension form within one year from the date of maturity.

Rate of Interest:  Rate of interest payable on the investment is as declared by the Central Govt. from time to time. Interest is calculated on the lowest balance between the close of the fifth day and last day of every month. Interest shall be credited in account at the end of year irrespective of change of account office due to transfer of account during the year.

Withdrawals:  Any time after the expiry of five years from the end of the year in which the account was opened, the account holder may, avail withdrawal by applying in Form-2, from the balance to his credit, an amount not exceeding fifty per cent. of the amount that stood to his credit at the end of the fourth year immediately preceding the year of withdrawal or at the end of the preceding year, whichever is lower: ✓ Provided that the amount of loan outstanding, if any, along with interest shall be paid by the account holder before availing the facility of withdrawal under this paragraph: ✓ Provided further that the facility of withdrawal may be availed only once in a year only from the accounts which have not become discontinued.  In case of an account opened on behalf of a minor, or a person of unsound mind, the guardian may apply for the withdrawal for the benefit of the minor or a person of unsound mind by submitting certificate to the account’s office.

Premature closure of account:  Premature closure is allowed after the completion of 5 financial year from the account opening date under following cases: ✓ That the amount is required for the treatment of serious ailments or life threatening diseases of the account holder, spouse or dependents on production of supporting documents from Competent Medical Authority. ✓ That the amount is required for higher education of account holder or the minor account holder on production of documents and fee bills in confirmation of the admission from recognized institute. ✓ On change in residency status of the account holder on production of copy of Passport and visa or Income tax return.

Note: Provided further that on such premature closure, interest in the account shall be allowed at a rate which shall be lower by one per cent than the rate at which interest has been credited in the account from time to time since the date of opening of the account, or the date of extension of the account, as the case may be. a) In case of extended accounts for blocks of 5 years, partial withdrawal is allowed up to 60% of the balance at the beginning of the extension period. b) A resident who opened an account under PPF Scheme, subsequently becomes a Non-Resident during the currency of the maturity period, the account shall be deemed to be closed with effect from the day he / she becomes a non-resident. Interest in account shall be allowed at rate lower by one percent than the rate at which interest has been credited in account from time to time since date of opening of account or date of extension.

Loans & repayment:  At any time after the expiry of one year from the end of the year in which the initial subscription was made but before expiry of five years from the end of the year in which the initial subscription was made.  The customer must apply in Loan application form, amount cannot exceed 25% of the balance at the credit at the end of 2nd preceding year.  No loan is permitted if an earlier loan is outstanding or the customer is eligible for withdrawals. Subsequent loan cannot be taken in same financial year even if the 1st loan is fully repaid.

In case of death of account holder, the nominee or legal heir shall be liable to pay interest on loan availed by account holder but not repaid before his death. Such amount of due interest shall be adjusted at the time of final closure of the account.

Nomination:  Nomination facility is available in the name of one or more persons.  The shares of the nominees can also be defined by the customer.  If the minor is a nominee, then the customer should also appoint somebody to receive and hold the PPF funds until the nominee attains the maturity.  No nomination is permitted in case of minor’s account. Nominee cannot continue the account after the death of the customer.  Nominee can apply to close the account and receive the fund after the death of the customer in premature closure form.

Transfer of Account:  The account can be transferred to/from other branches/banks/post offices. The transferee bank branch must be a designated branch for opening PPF Account. No charges for transferring the account.

Tax benefits:  Subscriptions during the financial year up to Rs.150000 only qualify for rebate under sec 80 C of Income Tax Act.  Interest accrued in PPF account and withdrawals thereof are fully exempt under sec. 10(11) of Income Tax Act.  The investment under the scheme is fully exempt from wealth tax.

Discontinued Accounts:  Accounts in which the minimum subscription of Rs. 500/- is not made during a financial year, is called a default in the subscription.  It can be condoned by depositing Rs.500 (subscription amount) and Rs.50 (default fee) for each financial year of default.  The account holder of discontinued account shall not be eligible to open new account before closure of such discontinued account after maturity.  Facility of loan and partial withdrawals shall not be allowed in such accounts, and to be allowed only for regular accounts only.

Passbook:  Passbook will be issued to every subscriber. In the event of loss of passbook, a duplicate passbook can be issued on payment of a fee.