Public Provident Fund (PPF) is considered a tax friendly tool for long term savings. Interest and maturity proceeds from PPF is exempt from tax. It also enjoys tax deduction under Section 80C.
Many companies continued to deleverage especially from key sectors like iron and steel, cement, telecom, sugar, roads, airports, railways, ports, plastic and its products and mining.
Loans can be availed from the 3rd to 6th financial year of the account. This means if the account was opened in 2021-22, a loan can be availed from 2023-24. It will be a short term loan for 36 months and must be repaid within the stipulated time frame.
Interest rates applicable on loans against PPF balance is as low as 1% annually. This is when the amount is repaid before the end of 36 months. But, if the amount is repaid after this period, interest is charged at the rate of 6% per annum from the date of disbursement.
The maximum amount of loan that can be availed here is a maximum of 25% of the total balance in the PPF account at the end of the second year, preceding the year in which the loan was applied for.
For example, if the PPF account holder has applied for loan in 2021-22, then 25% of the PPF account balance credit as on 31 March 2020 shall be considered as maximum loan amount that can be availed.
Form D is required to be filled and submitted to the bank/post authorities where the PPF account is held to apply for loan against PPF.
One must mention the account number and loan amount in this form and sign in the capacity of account holder. The PPF account passbook must be enclosed with the form.
It’s important to note that a single loan will be approved within one financial year and a second loan cannot be granted until the first one is duly repaid.
