INVESTMENT PLANNING THROUGH PPF UNDER SECTION 80C

What is PPF i.e. PUBLIC PROVIDENT FUND Scheme

PPF is a saving scheme declared by the Central Government of India and this is a long term investment option. It is a tax free Investment Scheme. One person can claim the deduction U/s 80C of I.T.Act, 1961 of the amount deposited during the year which cannot exceed of Rs.150000/.

Opening a PPF Account.

  • Any person can open the PPF account. He can open only one account in his name.
  • A PPF Account can opened in the Post Office, Any Nationalized Bank and major Private Bank such as ICICI Bank, Axis Bank etc.
  • PPF Account can be open on line through net banking.
  • Following documents required for opening the PPF Account:
  1. PPF Account opening Form (Form A )
  2. Address Proof and ID Proof
  3. Photograph
  4. Nomination Form

Tenure

  • Tenure of the PPF Account is 15 years from the end of the financial year in which account was opened.
  • Tenure of the PPF Account can be extend for next five years.

PPF Interest

  • Interest rate on PPF Account is declared by the Central Government every quarter.
  • Now interest rate is 8%.
  • Interest on PPF Account is calculated monthly basis on the lowest balance between the close of the Fifth day and the last day of every month.
  • For the purpose of calculation of interest, amount deposited in to account before 5th of the month is only considered.
  • It is advised that deposit should be made between 1st and 5th of the month to maximize the return.

Contribution

  • The minimum annual contribution is Rs.500/ and the maximum contribution is Rs.150000/ every year.
  • A Person can deposit lump sum or maximum of 12 contribution in a year.
  • A person can deposit in the PPF Account by cash, cheque, bank draft or on line transfer.

Nomination 

  • A person can made the nomination in the the favour of one or more person. When more than one person is appointed as Nominee than percentage share of each nominee also needs to be specified.
  • In minor’s PPF Account Nomination cannot be made.
  • Form E is used to add a Nomination in the PPF Account.
  • Form F is used to change, cancellation or alteration in Nomination at the any time during the tenure of the account.

Exemption  

  • Public Provident Fund falls under EEE regime of taxation i.e Exempt-exempt-exempt.
  • Contribution to PPF account is eligible for deduction U/s 80C of I.T.Act, 1961 subject to maximum of Rs.1.50 Lacs.

Attachement

  • The PPF account was earlier governed by the PPF Act, 1968 which protected from any attachment by any court.
  • In Budget 2018 repealed the PPF Act and brought the PPF Account under the Government Saving Bank Act, 1873.
  • The Public Provident Fund Account cannot be attached under any order or decree of any court or liability under the Government Saving Bank Act, 1873 and also protect against all creditors including income tax department.

Revival of inactive account

  • If minimum contribution of Rs.500/ cannot deposit per year than PPF account becomes inactive.
  • A written request made to concerning bank or post office with a fine of Rs.50/ each year the account has been inactive.
  • Minimum due amount of Rs.500/ for all the years the account has been inactive have to be paid.

Transfer of PPF Account

  • The PPF Account can be transferred from bank to post office or vice versa.
  • It can also be transferred between different branches of the same bank.

Premature Termination

After completion of five financial years the PPF Account can be closed prematurely. It can be done on following grounds :

  • Treatment of serious ailment or life threatening disease of the account holder, spouse, dependent children or parents.
  • Higher education of the account holder or the minor account holder.

Death of Account Holder 

In case of death of account holder the following documents are required to support a claim :

  • In case where the account holder has made Nomination
  1. Form G filled by the Nominee.
  2. Death Certificate of the Account Holder
  3. Passbook of the subscriber.
  • In case where the account holder is not made Nomination and claim is supported by legal evidence
  1. Form G filled by the legal heirs.
  2.  Death Certificate of the Account Holder
  3. Passbook of the subscriber.
  4. Succession Certificate, Letter of Administration or attested copy of the will.
  • In case where the account holder is not made Nomination and claim amount is less than Rs.1.00 Lakh
  1. Form G filled by the legal heirs.
  2.  Death Certificate of the Account Holder
  3. Passbook of the subscriber.
  4. Annexure I to Form G (Letter of indemnity) on stamp paper
  5. Annexure II to Form G (Affidavit) on stamp paper.
  6. Annexure III to Form G (Letter of Disclaimer on Affidavit) on stamp paper.

Maturity of PPF Account

  • The account holder can withdraw the PPF amount along with the accrued interest thereon.
  • The entire maturity proceeds are exempt from tax.

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