Important points You should know about your PPF Account

PPF (Public Provident Fund) Account is very suitable option for those investors who want tax free return and safe investment option. Some points should be keep in mind when you open PPF account. Often a lot of queries come to me about PPF. So here I am sharing some points about PPF .

Opening a PPF Account :

Any Indian citizen can open PPF account except NRI. You can open PPF account in any nearest State Bank of India branch, or a branch of any of State Bank’s subsidiaries. You can also open an account in select nationalized banks, and the post office or selected ICICI Bank branches also. The required formalities are Fill  the form, attach a photograph, give your PAN Number. After opening PPF account you will also receive a pass book for recording all your PPF transactions.

At any point in your life, you are allowed to have only one PPF account in your name. You can also have an account in the name of a minor child of whom you are the parent / guardian. However that will be the child’s account, you will simply be the guardian. You can never have a joint account. If at any time it is seen that you have more than one account in your own name, the second account will be deactivated, and only your principal amount will be returned to you.

Loan Facility

You can avail a loan from your PPF fund in case of need. The first loan can be taken in the third year of opening the account. For example if the account is opened during the year 2009-10, the first loan can be taken during the year 2011-2012. The loan amount will be restricted to 25% of the balance including interest for the year 2009-08 in the account as on 31/3/2010. The loan must be repaid in a maximum of 36 EMIs. After settling first loan you can also avail second loan.

Withdrawal Facility

You can make one withdrawal per year starting from your seventh year. The first withdrawal can be done after the expiry of 5 full financial years from the end of the year in which your initial subscription was made. This means that from the day you open your account, you will need to complete 6 full financial years before you can make any withdrawal. Thereafter, you can make one withdrawal per year.

The amount of withdrawal will be limited to 50% of the balance at credit at the end of the fourth year immediately preceding the year in which the amount is to be withdrawn, or the balance at the end of the preceding year, whichever is lower. For example: if you opened your PPF account on April 1st, 2006, you can make your first withdrawal after April 1st 2012, and the amount of withdrawal will be limited to 50% of the balance as 31st March, 2008, or the balance on 31st March 2012, whichever is lower.

Options at the time of maturity

There are three options available at the time of after 15 year maturity period.
Either you can withdraw your maturity amount, or you can extend your account by a 5 year block, as many times as you want and make fresh contributions, or you can extend the account without making any further contributions, and continue to earn 8% interest on it every year. The maturity amount is exempt from tax.
.If you choose to extend your account and continue making fresh contributions, you can extend it for a block of 5 years at a time, as many times as you want, you can also make withdrawals from the account, up to 60% of the account balance that was there at the beginning of the extended period. Just remember, if you choose to extend your account, submit the necessary documentation for extension before one year passes from the maturity date.

If you choose to extend your account without making any fresh contributions, you can do so. In this case, any amount can be withdrawn without any restrictions, you can only withdraw once per year. The balance will continue to earn interest till it is withdrawn.

If you have any other query about PPF and investment related feel free to contact me.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com