15 Things You Need To Know About PPF

While investing in PPF is one of the best ways to save on tax, here are 15 things lesser known facts you need to know about this investment option. Read on!

Public Provident Fund (PPF). You’ve probably heard about this form of investment at some point or another, but if you still aren’t aware of this term, we’re here to break it down for you.

What is PPF?

PPF is a fully tax-exempted long-term investment option provided by the Government of India, in which you can invest a minimum of Rs. 500 to a maximum of Rs. 1,50,000 in one financial year. Due to the tax exemption, PPF is considered to be one of the India’s most efficient tax-saving investment options.

What are the key features of PPF?

• The interest rates for this scheme are decided by the Central Government and are revised periodically (mostly annually).
• Interest earned under this scheme is fully tax-exempted and all withdrawals are exempted from wealth tax.
• To keep your PPF account active, you need to make a yearly deposit, for 15 years, which is the full tenure of the PPF account.
• You can make a minimum contribution of Rs. 500 and a maximum of Rs. 1, 50,000 per year. These amounts, however, are subject to change according to the revisions provided by the Government of India.
• You get to avail a loan facility against your PPF account from year 3 to year 6.

Additional Reading: Looking To Invest In PPF? Here’s What You Need To Know

But, enough of the basics. Here are some facts you must know about PPF:

• Although the upper limit of the annual investment is Rs. 1, 50,000, you can deposit more than that as well. The only thing is that it won’t earn any interest. Basically, this extra amount will just stay idle without helping you earn more and will most likely be returned to you by the Accounts Office. Depositing more than the upper limit, therefore, doesn’t make any sense.

Pro tip – If you have some extra cash handy, invest it in SIPs or explore other investment options.

• One person can legally open only one PPF account. But, in case you end up opening more than one, in different post offices, the second one will be treated as an irregular account. Even if you have one discontinued PPF account, you still can’t open another account. Since the second account won’t earn you any interest, it’s useless!

Pro tip – Instead of keeping two PPF accounts and paying a penalty on the second one, it’s better to explore some investment options that can help you earn.

• There’s no option to open a joint PPF account. You can either have an individual PPF account or you can open it for a minor as their guardian.
• If the account holder is a minor who has just attained age of majority, he or she will be treated as the account holder, but not the legal guardian of the account. To get that status, a revised application form along with a nomination form will need to be submitted. After getting the form duly attested by the guardian who opened the account, the minor can become the legal guardian of the account.
• If you have a discontinued PPF account, you can’t apply for a loan against it. However, in case you still want to get a loan against it, you need to pay the minimum subscription and the penalty. Once that’s done, you’re good to go!
• Discontinued PPF account? Don’t worry! You’ll still get the amount, with interest. All you have to do is wait till maturity. Such discontinued accounts earn interest too, but only after attaining maturity.
• You get to open another PPF account after the maturity of the previous one only if you’ve not got an extension on the previous account. Getting an extension, with or without any further contribution takes away your chance of opening another PPF account altogether.
• If you take up a loan against your PPF fund, you need to repay the principal within 36 months. Don’t worry! You still get the option to pay either in a single lump sum or in instalments. In case you’re unable to pay back within the prescribed period, the interest rates shoot up considerably, from 2% to 6%. This gets auto-debited from your PPF account. You wouldn’t want that happening.
  

  Pro tip – Ensure that you have only one fully functional PPF account to avoid the possibility of having a discontinued account. It’ll help you avoid all the unnecessary penalty charges and you’ll also get to avail all the usual facilities on your PPF account.

• There can be one or more nominee for your PPF account. You also get the facility of changing the nominees at any given point of time, without any extra charges. In case you want to appoint a minor as a nominee, you also need to appoint a guardian. Since a PPF account is non-transferrable, the nominees need to open their own accounts.
• Women get the option to change their name in the PPF accounts after marriage. In case they wish to do so, they’re required to submit a written request and also a proof of the marriage.
• If you want to avail the same tax benefits for your PPF account, even after maturity, you need to choose the option of extending it, with a contribution. In case you choose to extend the account without any contribution towards it, you’ll get tax benefits under Section 80C.
• All loan repayments you make towards your PPF account will not fall under the benefits provided under Section 80C.
• There’s no Power of Attorney facility available for PPF accounts. Therefore, no one can either open an account or operate it on someone else’s behalf.
• NRIs can’t open PPF accounts. However, if you opened a PPF account before becoming an NRI, you can continue to operate it.
• In case of the demise of the PPF account holder, the legal nominee gets to receive the amount even before maturity. Although the nominee gets the amount, he or she can’t make any fresh contributions to it.

Additional Reading: PPF Returns To Fall To 7.9%: What To Do

PPF accounts can prove to be one of the best tax-saving investment options, if you use them right. If you’ve read all of the above facts carefully enough, we guarantee that you know enough to open a PPF account (in case you haven’t) and start using it to perfection.