What is PPF (Public Provident Fund) Account?
Public Provident Fund Account or PPF is a kind of small saving account for everyone. It is backed by Govt. of India. It offers better interest rate than bank Fixed deposit. It is also useful to save tax under section 80C of the income tax Act. You can open a PPF account in bank as well as in Post Office.
What are the features of a PPF Account?
Important features of a PPF account are as following
- It is a small saving scheme for long term purpose. Primarily it was designed to save money during your job for retirement.
- The PPF account locks your money for 15 years. That means you have to operate your PPF account for at least 15 years.
- It is quite tax friendly. So when you invest I PPF account you will be eligible for tax deduction under section 80C.
- Maximum limit to invest for one financial year is Rs. 1.5 Lakh.
- The interest that you earn on PPF account is tax free, and also the maturity amount is free from tax liability.
- The interest rate on PPF is better than bank fixed deposit.
- The interest rate of PPF is linked to yield of the 10-year Govt. bond.
- The money you invest in PPF account it goes to the account of the government, so the government is responsible for the safety of your invested amount.
- One important thing you must know is: not every bank opens the PPF account and not every branch. All nationalized scheduled bank including SBI. And among private banks ICICI and Axis bank open a PPF account.
- In case of any emergency you can take loan against your PPF account.
- The amount in your PPF account can’t be used against the decree of court. That means your amount of your PPF account can’t be deprived of as a penalty.
- You can transfer your PPF account from one bank to another bank, from one post office branch to another post office branch and also from post office to bank or bank to post office.
- You can also withdraw your money before maturity date. But the reason should be significant like medical emergency or higher education.
What are the terms & conditions of PPF Account?
There are certain term & conditions that you must know before opening it:
- One cannot open the PPF account in the name of HUF or a Company; it can only be opened in the name of individual.
- Joint account can’t be opened.
- The minimum amount is required to open the account is Rs. 500.
- In case you have not contributed any amount for whole one financial year, it becomes inoperative.
- You can activate your inoperative account. You just need to pay minimum annual due for each lapsed year and penalty of Rs. 50 per year.
- You can deposit money up to 12 times in a year, but the whole amount should not exceed Rs. 1.5 Lakh.
- Partial withdrawal is allowed from 7th year, that too in case of medical emergency and higher education.
- If you want you can extend PPF account after the maturity too. At one time you can extend your account for five years that means your money will be fixed for five years again.
- In case of extension there are liberal rules for partial withdrawal.
- After completion of 15 years, there is no compulsion of annual contribution.
What are the benefits attached to PPF account?
PPF account has many benefits
- It is one of the safest investment options.
- Interest rate on PPF reviews every year.
- You can get the loan against your PPF account at a very low rate.
- It is a long term investment option, so it helps in accumulating a good amount of wealth.
- You can view your PPF account statement online because your account gets linked to your online savings account.
- You can deposit amount online in your PPF account.
How does the interest calculate on PPF amount?
In case of PPF account interest is compounded annually, but interest is calculated monthly. The interest of each month is added into your PF balance in the end of the financial year. It is not like saving account; in case of saving account interest is calculated on the minimum balance between the 5th day and last day of the month.
What is the procedure of opening a PPF account?
You can open the PPF account in a Post Office as well as in a bank. The Post Office which is double handed and above and Bank Branches which transact the government businesses open PPF account.
- To open a PPF account, you require KYC documents and one recent photograph.
- You can open PPF account with just Rs. 100. But you must deposit minimum Rs. 500 in a year.
- You can open your account by cash or cheque. In case of cheque the date of realization will be the date of account opening.
- Nomination facility is also there. You can opt for nomination at the time of account opening and after opening the account as well.
What is the procedure of transferring the PPF account?
There are some rules applicable, which allows a transfer of PPF Account from Post Office to Bank, from one bank branch to another bank branch of the same bank or any other authorized bank.
So, in case if you are changing your address, the first you have to close your account at the existing location and will have to open a new one and will have to follow the following procedure:
- Documents Required
- A written application on plain paper.
- Account transfer form.
- ID proof
- PPF Passbook
- Get the Form
Prepare a written application for transferring the PPF account to your bank branch or post office wherever you hold your account. And attach a transfer Form (SB10 – B).
You can also download the form http://tinyuri.com/98dau5a
- Information you need to provide
Fill the transfer form thoroughly and provide following information in the application:
- Details of the Account.
- Name and address of the Bank/Branch/Post Office where you held your account currently.
- Provide the location where you want to transfer your account.
Your application and signature will be verified by the branch with their records then closes your account.
Your application will forward to the back office to prepare the cheque or DD
Then a cheque or a Demand Draft for the outstanding balance will be sent to the new location, along with certified copy of the account statement, original account opening form, nomination form if nominee is there and a specimen signature.
- Documentation process
Once your application reaches to the transferee bank branch, you will have to fill the form and complete the KYC formalities. Once more you will have to go through all the documentation process.
- Points to be noted while transferring the account
- When you transfer the account it will be a continuing account not a new one.
- If you have a nominee you can also change the nomination along with the transfer of the PPF account.
- A new passbook will be issued with your previous credit in your account.