Why PPF is essential? - A brief analysis



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Though there is a plan called Employees Provident Fund (EPF) towards ensuring the future welfare of the workers and laborers already in place, there is another scheme called Public Provident Fund (PPF) executed by the government, considering the welfare of the workers in the unorganized and self-employment sectors. Anyone, including the general public, those who are not working in any organization or those who earn from other sources, can join the Public Provident Fund scheme. This scheme functions under the control of the government of India, providing more interest amount and also with tax exemption, proving as one of the highly beneficial plans.

How to open an account?

With the PPF scheme, one can open an account with a minimum of Rs 500 to a maximum of Rs 1,50,000 annually, paying on installment. In a year, one can pay in 12 installments at the maximum. And one can save money at the maximum for 15 years through the scheme.

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Currently, there is 7.6% interest rate provided for this scheme. Further, under Section 80-C of Income Tax act , there is no tax for the return out of this investment.

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In case, if one is not able to pay the minimum amount of Rs 500 in a year, one has to pay a penalty of Rs 50 only. At the same time, there is no ceiling to invest more than Rs 1.5 lakhs in a year. But there will not be any interest to the amount invested beyond the ceiling.

Those who are employed and have EPF benefits, can also invest in PPF Scheme.The rate of interest for PPF is more than Bank interest rates and it is a most secure investment scheme.

Benefit of Tax Exemption

Though EPF and PPF share the same scheme of benefits, there is a scope with PPF to define the investment amount as desired by the account holder. As the income earners are already having EPF account there is no need for them to have a separate PPF account. They can invest the desired amount along with the EPF account, giving direction to the financial department of the organization where they work. At the same time, there will not be any contribution by the employer for the enhanced PF contribution by the employee over and above the statutory requirement as per EPF roles.

Where to open the account?

PPF Account can be opened in any bank like  State Bank of India, ICICI bank through online. To know about the details of the scheme and details of the branches of those banks having the scheme operational or direct account opening,  visit to the banks personally. Further it can also be opened at the Post Offices. 

As some of the banks have the facility to open the PPF account online one can use the facility for the purpose. Some banks provide facilities for their account holders to open the PPF account through their websites. Further, there is also a provision to transfer one’s PPF account from a bank to a post office or vice versa.

Required Documents

Duly filled in PPF application form
Identity Proof: Driving licence, PAN card, Passport and Voter Identity Card (Any one of them)
Residential and Current Address proof
Recent passport size photos, two

Interim Withdrawal

What is important here is that one cannot withdraw the amount invested before its tenure of fifteen years gets completed. But a particular amount of the investment can be withdrawn as a loan.

How to close the account?

The account holder should submit an application towards closure of the account either at the bank or the post office, providing the details of the PPF account number, and bank account details where the invested amount should be transferred to.

Points to Consider

One can open a new account only when the current PPF account, if any, is closed.

Once Form H is submitted, requesting the extension of the investment on the PPF account, it can be extended for the next five years. But only 60% of the amount extended can be withdrawn while requesting for an extension.

It is better to open a PPF account if one has not yet opened the account. 

PPF Account can be continued without investment

If an investor does not close the account even after the completion of fifteen years, the account will automatically be extended for another five years. At the same time, the account holder will begin to receive the interest amount based on the total amount of money invested in the PPF account. But, the investor will not be able to invest any further amount in the same account.

If an investor wishes to continue investing on the PPF account even after the maturation period, the investor should submit Form H at least within one year of the maturation, at the bank or post office. After choosing to do that one can continue investing on the same account, and continue to enjoy the benefit of tax exemption under the Section 80-C.

(This article written by Mukilan in Tamil for Naanayam Vikatan magazine dt 29/8/18 has been reproduced in English by V Amalan Stanley)



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