Tax Corner
15 Year Public Provident Fund Account

  • Who can subscribe
    Any individual in his own name or on behalf of a minor, for whom he/she is a guardian and HUF, can open a PPF in addition to a GPF account. Only one PPF A/c can be opened in one name.

  • Where to apply
    A PPF account can be opened at any branch of State Bank of India and its subsidiaries or at the head offices or sub post offices or sub post offices in section grade or at branches of the nationalised banks engaged in the collection of direct taxes.

  • Subscription
    PPF is a 15 year scheme, requiring minimum 16 contributions in all. The amount of annual subscription ranges from Rs 500 to Rs 70,000 payable either in lump sum or convenient instalments, not exceeding 12 in a year. The instalment should be in multiples of Rs 5.

  • Excess deposits
    Amount deposited in excess of Rs 70,000 in a year, will not be treated as ‘subscription’ and shall be returned without any interest.

    Although one person can have only one PPF account in his name at a time, he can contribute on behalf of his children or spouses and enjoy all the tax benefit as in his account.

  • Interest
    Deposits in the account earns an interest of 8% per annum compounded annually. Interest is payable on the lowest balance between the fifth day and the last day of the calendar month.

  • Nomination
    One or more person can be nominated. The nomination facility is also available in respect of an account opened on behalf of an HUF.

  • Maturity
    The normal maturity period is 15 years from the close of the financial year in which the initial subscription was made. An Account, on the expiry of fifteen years, may be extended for a period of five years at a time.

  • Loan
    Depositors can take a loan in the third financial year from the financial year in which the account was opened. Loan can be taken up to 25% of the amount standing at the end of second preceding financial year, repayable in 36 instalments having the interest rate 1% higher than he receives. Second, the loan will be given only after the repayment of the first loan. No loan can be obtained after the end of 5th year following the expiry of the year in which the initial subscription was made. In case of death of the subscriber, the nominee/legal heir is liable to pay interest on loans availed of by the subscriber but not paid before his death.

  • Withdrawals
    A subscriber is permitted to make one withdrawal every year from the 7th financial year. An amount not exceeding 50% of the balance to his credit at the end of 4th year immediately preceding the year of withdrawal or at the end of preceding year, which ever is lower. The withdrawal can be made even every year.

    Example:
    Years Balance (Rs)
    31.3.2000 200,000
    31.3.1999 150,000
    31.3.1998 120,000
    31.3.1997 100,000

    In the above case, the subscriber can withdraw Rs 50,000 in the year 2000-01.

  • In event of death of the subscriber
    The amount standing to subscriber’s credit will be repaid on demand to his legal heirs or the nominee. However the un-drawn balance will continue to earn interest till the end of the month, preceding the month in which the amount is paid to the nominee/legal heir.

  • In case of no nomination
    The scheme now permits payment of balance up to Rs 100,000 to the legal heirs on the basis of affidavits. Earlier the heirs had to produce a succession certificate to get back the balance to the credit of the deceased.

  • Default
    Where no amount is deposited in PPF account in any year the same should be got regularized by depositing at least Rs 500 per year along with a penalty of Rs 100 per year

  • Continuity after maturity
    At the subscriber’s option, the scheme may be continued for another 5 years after maturity. This facility can availed for further period of 5 years on the expiry of 20th years and yet another 5 years on the expiry of 25 years and so on. The option should be exercised within one year after expiry of 15 years or the extended block period by applying in Form H.

    Subscribers who continue their account after 15 years, with fresh subscription, can make one withdrawal per year subject to the condition that the total of the withdrawals during a block period shall not exceed 60 percent of the balance to their credit at the commencement of the extended period.

  • Tax benefit
    The amount deposited and interest earned on it (including interest during the extension period) is completely exempted from income tax u/s 10(11) and the entire deposit in the account is exempted from wealth tax.

    The annual contribution upto Rs 70,000 is eligible for rebate u/s 80C. An Investor can deposit Rs 70,000 in their PPF A/c, even if they have already paid the amount in LIC, NSC, ULIP. Rebate is also available on contributions made during the extended period provided the option to continue is exercised within one year of expiry of 15 years (or the extended block period).

  • Protection from attachment
    PPF cannot be attached under any order or decree of court.