Public Provident Fund or PPF is one of the most popular tax-saving investment schemes in India, where contributions towards it is deducted from the taxable income. The interest gained on the deposits is also exempted from tax deductions. Let us know in detail about PPF in this article below.
PPF Interest Rate FY 2021-22
The current rate of interest (for F.Y. 2021-22) is 7.1% for any kind of PPF account.
What are the Tax Benefits of PPF?
Under Section 80C of the Income Tax Act 1961, a maximum investment of Rs. 1.5 lakh per year is exempted. PPF Falls under EEE category i.e. Exempted at Investment Stage, Exempted at the stage of Interest Credited, and Exempted at the time of Withdrawal. The minimum lock-in period is 15 years.
Can an Individual Open a PPF Account for Children?
Yes, a PPF Account can be opened for a minor by the parents or legal guardian. It can be opened in the name of the child and maintain under the guardianship of the parents. The minimum deposit limit is Rs. 500 per year and the maximum deposit limit is Rs. 1.5 lakh per year. Remember that this limit is combined for both your own account and the account where you are a guardian. In case you fail to deposit the minimum amount, then there is a penalty of Rs. 50 for each year.
Suggested Read: PPF Account for Minors
How is PPF Calculated?
The PPF account interest is calculated annually and credited at the end of the year. The interest is calculated on the lowest account balance between 5th and the last day of the month. This means, that if your deposit on/after 5th of the month, then you don’t earn any interest for that particular month.
How to Revive Inactive PPF Account?
In case you fail to deposit a minimum of Rs. 500 in a year, your PPF account will become inactive. In such a situation, you need to do the following, in order to revive your account:
- Submit a written request at the post office or the bank where you have your PPF account
- You will need to pay a penalty of Rs. 50 for each year when the account has been inactive
- Contribute a minimum amount of Rs. 500 into your PPF account for each year
- Get all the documents, signatures, and penalties verified by the bank/post office. Please note that the account holder should be present for verification
Note: Once the verification has been done successfully, your dormant PPF account will be activated.
What are the Forms Involved in PPF Scheme?
Following forms involved in PPF Scheme:
Form A – To open the PPF account
Form B – To deposit or pay money into an account. It can be monthly deposits, repayment towards the loan taken against the account, or the payment of penalties
Form C – To withdraw the partial amount from the account. This can be done 7 years after opening the account.
Form D – To request for loan against your PPF account, offered from 3rd year to 6th year
Form E – To nominate one (or more than one) nominee for your PPF account
Form F – To cancel or make changes in nominations for the PPF account
Form G – To claim funds by the nominee, in case the account holder dies. Along with this form, the death certificate has to be enclosed
Form H – To extend the maturity period beyond 15 years to further 5 years.