PPF: Nine lesser-known facts you should know

Public Provident Fund (PPF) is one of the most popular instruments in which people invest to build a corpus to be used during retirement years. Currently, it offers an interest rate of 7.1%.

It is a good investment option for the long term since it has a maturity period of 15 years that can be extended. It also attracts tax exemption under 80C of the Income Tax Act.

Tax-free

Contributions up to Rs 1.5 lakh a year in PPF qualifies for income tax deduction while the interest earned and the maturity is also tax-free.

If you withdraw your PPF fully or partially, both are fully tax-free.

However, there are a few points that are lesser known. One should do well to know them before opening a PPF account.

Nine things you should know

— A PPF account cannot be open by joint holders, though a minor can open PPF account under the guidance of any one of the parents. But nomination facility is available in PPF.

— NRIs cannot open a new PPF account. But NRIs can continue to hold their pre-existing PPF accounts, which were opened while they were resident until the maturity period. Also they cannot make fresh contributions to their existing PPF accounts.

— In a year, a person can contribute a maximum of 12 times with a maximum limit of Rs 1.5 lakh. The minimum contribution in a year is a single contribution of Rs 500.

— If a person wants to continue with his/her matured PPF account i.e. after 15 years then the person has the option to extend the maturity period of the PPF account in a block of 5 years. The account can be extended for ‘N’ number of blocks of five years each.

— A person has the option of transferring his/her PPF account from post office to banks and vice versa. Similarly, you can transfer your PPF account from one bank branch to another or to other banks as well.

— Interest in PPF account is calculated on the minimum balance between the 5th day and end of each month. To maximise interest, a subscriber should deposit the contribution, or lump sum, before the 5th of each month.

— PPF accounts allow partial withdrawal from the seventh financial year. Partial withdrawals from the PPF are also tax-free. Partial withdrawals are also allowed even if the PPF account is extended beyond 15 years.

— No person is allowed to have more than one PPF account at a time. If more than one PPF account is detected one would lose the entire corpus as per PPF regulations. In case of two PPF accounts are found, the second one would be regarded as invalid.

— PPF interest rate is generally revised quarterly by the central government.