Some lesser known facts about PPF

The Public Provident Fund (PPF) is one of the most popular long term investment options in the fixed income category due to its attractive features like income tax rebate of up to Rs 1 lakh of investment  per year u/s 80 C, tax –free interest of 8 % pa and the maturity amount  being tax free u/s 10 ((10) D).While these are the commonly  known facts about the PPF, here are some lesser known features you should be aware of –

PPF A/c actually runs for 16 years.

Though the PPF claims to have a term of 15 years, the account matures after 16 years. This is because the term is calculated as 15 years from the end of the financial year in which it was started. For eg.- If an investor started this a/c on 1 June 2005, the maturity would be 15 years from 31/03/2006 (end of financial year 05-06) i.e 31/03/2021. The PPF a/c  will mature on 01/04/2021.

It is easy to revive discontinued/irregular accounts.

For some reason if you have missed out paying the minimum contribution of Rs 500 per annum towards your PPF for one or more years due to which the account is inactive, it is possible to revive it anytime by just contributing the minimum Rs 500 plus a penalty of Rs 50 for each year of non-payment. But no loans and partial withdrawals are allowed during the discontinued period.

NRIs cannot invest in PPF but can continue their old a/cs till maturity.

If you have opened a PPF a/c in India while a resident and later moved to some foreign country and are an NRI now, you can continue investing in this a/c till maturity, but cannot open any fresh a/cs  as a non-resident.

PPF A/c can be continued after maturity too.

The PPF a/c can be continued even after maturity in blocks of 5 years at a time. This can be done both with or without further additions. If extended with fresh subscriptions, the investor has the facility to withdraw 60 % of the balance once per year during the extended period. If the a/c is continued without further investments, any amount without an upper limit can be withdrawn, once per year.

PPF can only be opened in a single name, no joint holding is possible.

Only one a/c can be opened per person.

One person cannot hold more than one PPF A/c. However, he can open multiple a/cs as a guardian – one  a/c each in the name of each of his minor children with himself as the guardian with the condition that the total contributions in all these a/cs put together-self plus as a guardian does not exceed 1 lakh per financial year.












5 responses

  1. Dr M Chandrashekhar | Reply

    Good points. I propose to use PPF as a Pension tool for my son — now 27 yrs. Would that be OK ?

    1. Yes. In the absence of govt. provided social security in our country, PPF with its high safety and tax free interest rate of 8 % p.a is an excellent avenue to save for retirement.

  2. Herman Sequeira | Reply

    can a irregular account be extended after paying the penalty

    1. I presume what you mean is that the a/c is inactive for sometime due to the minimum deposit not being done regularly. An inactive a/c can be revived by paying the minimum Rs 500 + Rs 50 i.e Rs 550 for each year of non-payment. For Eg- If you haven’t operated the PPF A/c for the last 2 financial years, you have to pay 550 * 2 = 1100 to activate it.

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