Rules of the Public Provident Fund you need to know about

Public Provident Fund Scheme was introduced by Government of India on 01.07.1968 and it provides the depositor the twin benefits of attractive return and tax benefit. The salient features of the Scheme are as under:-

Eligibility

• Individual or individual as guardian of a minor can open the account. (can not be opened in Joint names).
• HUF are not eligible.
• Non Resident Indians (NRIs) can not open the account w.e.f. 25.07.2003
• HUFs can not open the account w.e.f. 13.05.2005
• Accounts opened by NRIs and HUFs prior to above mentioned dates will continue till maturity. Thereafter no extension is allowed and no interest is payable on HUF and NRI PPF Accounts.
• Only one account can be opened by an individual in one name. Second PPF Account opened in contravention of PPF Rule shall not earn any interest on it.

Deposit

Every individual desirous of subscribing to Fund under the Scheme for the first time either on his own or on behalf of a minor of whom he is the guardian shall apply to the Accounts Office in Form A form, together with the amount of initial subscription which shall be minimum of Rs.100/-.

Minimum remittance of Rs.500/- and maximum of Rs.1,50,000/- in multiples of Rs.5/- can be made in lumpsum or in 12 installments per year.

(The subscription limits stands enhanced to Rs. 1,50,000/ per year w.e.f. 23.08.2014)

Duration

The account is of 15 years duration and the account can be continued for one or more blocks of 5 years without loss of interest on written request within 1 year from the date of maturity.

Interest

Interest on PPF is payable as per Government of India, Ministry of Finance Gazette Notification issued in each quarter.

Loans And Withdrawals

The depositor is eligible for a loan. The first loan can be taken in the third financial year from the financial year in which the account was opened up to 25% of the amount at the credit at the end of first financial year. Loan is repayable in 36 months. W.e.f 01.12.2011, Interest is payable on the loan at 2% per annum of the principal. The repayment of loan may be made either in one lump sum or in two or more monthly installments within the prescribed period of thirty six months. The repayment is credited to the subscriber`s account. After the principal of the loan is fully repaid, the subscriber shall pay interest thereon in not more than two monthly installments at the rate of two per cent per annum of the principal. If the loan is not repaid within the prescribed period of thirty six months, interest on the amount of loan outstanding shall be charged at six per cent per annum instead of at two per cent per annum.

Withdrawal is allowed every year from the end of the 5th year. The amount is limited to 50% of the balance at credit, at the end of 4th year immediately preceding the year in which the amount is withdrawn or at the end of the preceding year whichever is lower less the amount of loan if any drawn by him which remains unpaid. If the account is continued after maturity, a partial withdrawal up to 60% of the balance of credit at the commencement of the extended period is permitted.

Transfer Of A/C

The account is transferable to and from permitted branches of Nationalised or Private sector Banks or Post Offices on the request of PPF A/c Holder.

Premature Closure Of PPF A/C

Premature closure of the PPF account is allowed as per PPF rules only after the account has completed five financial years.on the following grounds :

• That the amount is required for the treatment of serious ailment or life threatening disease of the account holder, spouse or dependent children or parents on production of supporting documents from the competent medical authority.
• That the amount is required for higher education of the account holder or confirmation of admission in a recognised institute of higher education in India or abroad.
• That a premature closure penalty of one per cent shall be deducted from the interest payable on the deposits held in the account from the date of opening of the account till the date of such premature closure.

Tax Benefits

Presently, the subscriptions to the account qualify for deduction under Section 80 C of IT Act. The interest credited to the account is totally exempt from Income Tax. The amount standing to the credit of the account is fully exempted from Wealth Tax.

Revival

Discontinued account can be revived on payment of Rs.50/- per year along with arrears of subscription of Rs.500/- p.a

Source : PNB Bank