All that you need to know about long term investment in PPF

Public Provident Funds, abbreviated as PPF, is exceptionally beneficial to save tax. But what it is & how could it prove as a tax saving instrument, let’s know it in a better way:

PPF is Govt.’s long-term debt scheme, wherein one can earn a massive tax-free return just by investing some amount. This return is usually more than the return on FDs by banks. Anyone can take its benefit, either a salaried employee or self-employed person. It gives a double advantage to the PPF holder, on the one side, a secure investment with the definite handsome return and on the other hand, a safe and legal way to save the tax.

What is PPF & How to open a PPF Account

PPF Account: For a definite period, one can open and invest in PPF account. It will make you eligible for fixed earnings on the amount being invested by you. To open PPF account, you can go to any authorized bank/branch, a nationalized bank or even a post office.

What documents would you require to open PPF account?

  • Fill the required details in the form provided to you.
  • Attach your photograph at the required place.
  • You must have a PAN card because it is necessary to mention a PAN number in the form.
  • Anyhow, if you don’t have PAN then attach a copy of passport, Aadhar Card or ration card or voter’s ID card.
  • You have to deposit minimum Rs. 500 in PPF account.

That’s enough to create your PPF account. You will be provided Passbook after recording each of your details.

How to make a PPF investment and get returns from PPF Account?

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  • From 1st to 5th of a month, you can invest. April is considered as the best time to invest in PPF account.
    One can make the maximum investment of Rs. 1.5 Lakh annually. In one year, a maximum number of installments are 12 only.
  • From the 5th day to month’s last day, whatever the lowest balance left, on that amount interest is being calculated.
  • Return is fully guaranteed in PPFs, but the rate of return keeps on changing every quarter or year.
  • One can withdraw 50% of the lower of either balance at the 4th year’s end or of the preceding year.
  • The maturity period will end after 15 years. After maturity, you will get three options:
    Withdraw the entire amount. This whole amount is exempted from tax.
    Extend the account by five years & make more contributions.

Extend & earn interest for more years, without contributing more amounts.In case of PPF extension, if you want to withdraw some amount, then 60% of the amount remained on starting of extended years, can be withdrawn. But if you aren’t contributing further and want to extend, then withdrawal can be of any amount.

Is PPF returns tax-free and does it come under 80C?

The amount contributed in PPF is entirely exempted from tax up to Rs. 1.5 Lakh. This exemption is available as per section 80C of Income Tax Act. You will neither be taxed for accumulated PPF returns nor for the withdrawal amount or amount you get on maturity. From all the sides, you are safe from a tax point of view.

Can the PPF account be opened online?

Yes. It’s possible to open a PPF account online. In selected bank branches only, you can get your PPF account opened. For the even online opening of an account, you have to deposit required documents, photographs and ID proofs as demanded. The online process differs from bank to bank.

Can the PPF account be opened for a minor?

Yes, parents can open the PPF account in the name of their child below the age of 18 years. The income from it will get merged with parents’ income. Either father or mother, anyone, can open it, but they can’t do so individually in the name of the same child.

Can the PPF account be transferred?

Yes, it’s possible to transfer the PPF account, if this account has become a hassle for you. Follow these simple steps to transfer your PPF account to any bank or post office:

  • Fill the transfer request form and submit it to post office or bank, in which account was opened.
  • Pay Rs. 500 to discontinue the account.
  • The bank or post office, from where you want to discontinue, will transfer all your original documents like nomination form, account opening application, specimen signature and all.
  • The bank will also send DD or cheque of the amount outstanding in PPF account. These will be transferred to the new bank or post office where holder wants to shift.
  • After transfer, the holder has to deposit fresh account opening form, fill the nomination form (if required) and submit original PPF passbook.
  • Deposit your KYC documents.

Does PPF have compound interest?

Yes. On balance left in the PPF account, annually, interest is being compounded. Every month its calculation is done on balance left from 5th day to month’s last day.

How to earn maximum interest from PPF Account?

To get excessive interest, invest at least Rs. 1 lakh in the starting of the financial year. Before the 5th April of each year, you will get maximum interest, as it follows accounts as per financial year. To deposit amount every month, remember always to deposit before the 5th day of that particular month. In this way, you will get the whole month’s interest. By following these simple tricks, you will be able to get more benefit of this saving option.

Can the PPF account be seized by the court?

No, this will not happen in any circumstance. You are entirely safe to invest in it & will never get a seizure order from the court ever.

Can PPF amount be withdrawn from any branch?

This is a big question, and people always want its answer that whether it’s possible to withdraw PPF amount from any bank or its necessary to withdraw only from the bank where the PPF account has been opened? Then its answer is yes. Government banks give you the facility to withdraw amounts from a different bank branch, but post offices will not give you this service. For this, follow the following procedure:

  • Get ready your KYC documents and form C. Submit it to the bank along with a copy of passbook, ID proof and proof of address.
  • Submit a canceled check of the bank in which you want your PPF amount. Keep original as well as a copy of canceled cheque in with yourself.
  • Go to the local branch of your bank. Give the reason for withdrawal to the bank. You have to sign some documents at the bank. To fulfill queries of the bank, you have to visit your regional bank branch.
  • The bank itself transfers the documents to the bank where you want to get withdrawal.
  • The bank will complete the process under NEFT or RTGS process. You can follow it to withdraw either full or partial amount as well.

Who will get the PPF amount, on the death of the holder?

In such a case, the PPF nominee will get the entire amount. The holder, while completing the procedure of opening a PPF account, gives the name of a nominee. Anyhow, if nominee’s name has not been mentioned, then that amount will go to the legal heir.

Can the PPF account be closed before maturity?

Yes. Now its possible to withdraw the entire amount before maturity, but in some instances only. For higher education of children or case of severe ailment, you can do premature withdrawal amount from PPF account. As a penalty, 1% interest, you have to forget. In this way, in extreme circumstance, it is possible to close the PPF account before completing the maturity period.

Hope this information will help you a ton and your all queries regarding this secure long-term investment get solved. Anyhow, if you have any question or information to share with the public regarding it, then don’t forget to tell us in the comment box.

Also Read: Why should you file ITR even if your income is not taxable

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