Public provident fund or PPF retained its attractiveness as a good investment option for the long term after the government kept interest rate unchanged for the October to December quarter at 7.9%. Apart from safety factor as it backed by government of India, PPF also offers tax-saving benefits. Contributions up to ₹1.5 lakh a year in PPF qualifies for income tax deduction under Section 80C while the interest earned and the maturity is also tax-free. PPF has a maturity period of 15 years.
Here are 10 things to know about PPF account:
1) A PPF account cannot be opened in joint names.
2) A parent or guardian can open a PPF account in a child's name in the capacity of guardian of the minor. But if guardian already has a PPF account in his/her name, the maximum amount that can be deposited in the guardian’s account including child’s account is ₹1.5 lakh per year.
3) If the contribution to the minor’s PPF account is from the income of the parent/guardian, the parent/guardian can claim tax benefit under Section 80C of the Income-tax Act.
4) When the minor turns 18, an application can be submitted to change the status from minor or major. The signature of the minor who became major has to be attested by the guardian who opened the account. Thereafter the operation of the account can be handled by the major.
5) NRIs cannot open a new PPF account. But NRIs can continue to hold their pre-existing PPF accounts, which were opened while they were resident until the maturity period. They also cannot make fresh contributions to their existing PPF accounts.
6) Interest in PPF account is calculated on the minimum balance between 5th and end of each month. To maximize interest, a subscriber should deposit the contributions or lump sums before the 5th of each month.
7) PPF accounts allow partial withdrawal from the seventh financial year. Partial withdrawals from the PPF are also tax-free.
8) Partial withdrawals are also allowed even if the PPF account is extended beyond 15 years.
9) A PPF account can be retained after the maturity period of 15 years, with or without making any further contribution. The PPF account continues to earn interest till it is closed.
10) If a subscriber wants to make further contributions after the maturity period of 15 years, the subscriber has to submit Form H within one year from the date of maturity of the account.