• Mar
  • 27
  • 2012

Unlocking Provisions of Public Provident Fund (PPF)

The Public Provident Fund (PPF) is the darling of all tax saving investments. No wonder! You invest in it and you get a deduction on your income. Besides, the interest you earn on it is tax-free. Since it is a scheme run by the Government of India, it is also totally safe. You can be sure no one is going to run away with your money. Herein below, we have summarised the features of scheme for you:-

1.Where to Open a PPF account?: A PPF account can be opened at any SBI Branch or at any Branch of its subsidiary bank. You can also visit any nationalised bank in your neighbourhood or head post office or selection grade sub-post offices to open a PPF account.

2. Forms to be filled:- One needs to fill an account opening form and attach therewith a photograph and photo copy of PAN Card. If one does not have a PAN Card, then one can furnish an attested copy of the ration card, voter’s identity card or passport.

3. Limit on No. of accounts:- One Person can have only one PPF account in their name. If, at any point of time, it is detected that one has more than one PPF account, then the another account opened will be closed, and you will be refunded only the principal amount, not the interest.

4. Only Individual can Open PPF Account - Only an Individual can open a PPF account on or after May 13, 2005 and account opened by a person other than Individual on or after May 13, 2005 will be treated as invalid and the depositor will not be entitled to any interest.

In respect of account opened by a person other than Individual prior to 13th May 2005 the account shall continue till maturity but no extension will be granted.

5. Account by a Non Resident:- Non Resident Indians are not eligible to open a PPF account. However if a resident who subsequently becomes a Non Resident Indian during the prevalence of the maturity period prescribed under PPF Scheme, may continue to subscribe to the Fund till its maturity on a Non Repatriation Basis.

6. Joint PPF Account:- You cannot open a joint account with another individual. The account can only be opened in name of one person.

7. Account in name of a Minor:- Either father or mother can open a PPF account in the name of his /her minor child but not both.

8. Limit of subscription:- Any individual may, on his own behalf or on behalf of a minor of whom he is the guardian, deposit in a PPF account any amount not less than Rs. 500/- and not more than Rs. 1,00,000/- in a year .

9. Number of subscription: The subscription, which shall be in multiples of Rs. 5 may, for any year, be paid into the account in one lump sum or installments not exceeding twelve in a year.

10. Date of deposit for Interest Purpose w.e.f. 29.03.2010 in case of Cheque Payments will be the date of realization of the amount, earlier the date of deposit of Cheque was considered for Interest Purpose.

This issue becomes particularly relevant in respect of deposits made towards the end of the financial year by cheque / demand draft because if the same is not realised by March 31, then the same will be treated as deposits for the following financial year and deduction u/s. 80C will not be allowed.

For Example : Let’s say you have issued a Cheque on 29.03.2012 to deposit Rs. 20,000/- in PPF but Cheque is cleared and amount is realised on 01.04.2012.Then deposit date will be considered 01.04.2012 not 29.03.2012 and accordingly the tax deduction under 80C will be available in Financial Year 2012-13 instead of Financial Year 2011-12.

11 Rate of Interest: - The current rate of interest is 8% till 30.11.2011 , 8.60 % from 01.12.2011 to 31.03.2012 and 8.80% from 01.04.2012,  which is compounded annually. Interest earned in PPF account will be totally exempt from Income Tax under section 10(11).

12. Duration: – The PPF account is valid for a period of 15 years. The entire balance can be withdrawn on maturity, that is, after 15 years from the end of the financial year in which you had opened the account. So, if you had opened an PPF Account in the Financial Year 2011-12,you will be able to withdraw it 15 years later, starting March 31, 2012. That means your PPF matures on April 1, 2027. It can be extended for a period of five years after that. During these five years, you earn the rate of interest and can also make fresh deposits. Once your account expires, you can open a new one. The only limitation is that you cannot withdraw it until seven years are completed, after which 50% of your deposits can be withdrawn, if needed.

13. Nomination and continuation of account after death:- PPF account holder can nominate one or more individuals. If there are no nominees, the legal heirs get the money. On the death of the account holder, nominees/legal heirs cannot keep the account going by making contributions.


14. Tax relief on Investment:-
Deposits on Public Provident Fund account qualify for tax deduction under Section 80C of Income Tax Act, 1961 subject to maximum limit of Rs. 1,00,000/-.

15. Tax Relief under Direct Tax Code: Government has continued the tax exemption available under the Income Tax Act, 1961 in Direct Tax Code. Amount received on Maturity of PPF account will also continue to remain exempt.

Frequently Asked Questions

Q. Can the PPF account be attached by Tax Authorities?

A. Yes, the PPF account can be attached by the Income Tax and Estate Duty authorities. The PPF act only gives the account holder immunity against attachment under a decree / order of a court of law.

Q. Can I open an account in the name of a minor?

A. Certainly. Under the Public Provident Fund Scheme, an individual may open one Public Provident Fund account on behalf of a minor child of whom he is the guardian. It may be reiterated that only one account may be opened in one name. Thus, if a guardian opens an account on behalf of a minor child, another guardian cannot open an account on behalf of the same minor child.

Q. Is the benefit of Tax Deduction under section 80C of the Income Tax Act available to a spouse when he or she contributes to the Public Provident Fund account maintained by the other?

A. Permissible! The benefit under Section 80C is admissible to both, a husband contributing to the wife’s account and the wife contributing to the husband’s account. However, there is one condition; the contributions should be made out of the contributor’s taxable income.

Q. For how many years can a PPF account be extended after the initial 15 years of operating a PPF account?

A. After the PPF account has been in operation for 15 years, it can be extended for a further duration of five years.

Q. In the event of the death of the minor subscriber is the balance in the account payable to the guardian?

A. No, the guardian is not entitled to the payment of the balance. The balance in such cases is payable to the legal heirs of the minor, in accordance with Section 8 of Public Provident Fund Act and para 12(6)(ii) of the Public Provident Fund Scheme.

Q. What is the procedure for transfer of a PPF account from one branch of a bank to another branch, or one post office to another post office?

A. PPF Account Transfers Forms are available with the post office/branch where you are having account, fill up the form and submit for transfer.

Q. What is the procedure for transfer of a PPF account from a Bank to a Post Office?

A. The Bank will issue an “Account Payee Cheque” or a Demand Draft for an outstation transfer. The “Account Payee Cheque” will be in favour of the transferee Head Post Office along with a certified copy of the ledger and all other related records in original like -

o application for opening the account

o application form

o signature cards and

o nomination forms.

The cheque/draft will be drawn by designation and will indicate that it relates to PPF Account No……….. On receipt of the PPF account on transfer with the cheque or draft from the bank, the account will be opened at the transferee Head Post Office like any other new account is opened.

Q.  I have a PPF account in State Bank of India. Can I instruct the bank to take out Rs 5,000 every month from my savings account and automatically deposit it my PPF account? What instructions do I give to the bank?

A. As per Public Provident Fund Act, 1968, any individual can deposit a minimum of Rs. 500 and a maximum of R 1,00,000 in a financial year.

The deposit can be made by way of cash, cheque, NEFT (national electronic fund transfer) and/or SIP (systematic investment plan). The depositor can instruct the bank/branch in writing that a specified sum of money be paid into her PPF account by debit to her account per month. The depositor should give standing instructions to her bank on the above lines giving details of both the accounts. The customer should ensure adequate balance in her account for the bank to carry out standing instructions.

Sandeep Kanoi

17 Responses to “Unlocking Provisions of Public Provident Fund (PPF)”

  1. Harsiddh Amin says:

    I opened PPF a/c with BOB on 30/03/1994 an till now it is running.It will be completing 20 years on 30/03/2014 means initial 15 years + extension of 5 years. Now, I wish to withdraw the major sum leaving some amount in a/c and also wish to continue for another 5 years.
    Request your advice on above if I can do so.
    Thanks and Regards.

  2. g misra says:

    Dineshchandra Bhailalbhai Gandhi VS. TRO (Gujarat High Court), Special Civil Application No. 11575 Of 2005, Dated : 12th February 2014

    this order says otherwise that ppf cannot be attached??? clarify

  3. AS says:

    12/01/13

    Sir,
    It might be a complicated situation, in my case.
    I am an NRI from 2004 and in ignorance of the rules I have opened up PPF a/c in 2006 (while i was NRI).
    Now what options I have, as technically as an NRI I cant operate a PPF.
    Having read some articles I understand that I can stop annual contribution towards PPF which will make the PPF ‘inactive’. My query in this context is… if the PPF is inactive, will the interest generation STOP?
    Please can someone clarify and guide me.
    Thank you
    AS

  4. Pankaj Jain says:

    Sir, hope one of my doubt will be clarified by you which i am unable to get details from anywher. I have daughter-above 18-at present student-have ppf account-dependent on me, can i deposit money in her ppf account not for tax benifit for either of us but to realise tax free interest at reasonable rate instead of keeping in my SB account where interest is charged tax at the rate of 30+ %.
    My another child is minor, have an account, i deposit some money in his account, What is the limit? Please note my cpf is sufficient to meet the limit of Rs one lakh for tax benifit purpose. Only purpose is to get reasonable tax free interest.
    Thirdly my wife who was in service and left in yaer 2000, maintaining seperate account, ther are incomes from interests or divdends of investments. Can I deposit some money in her account without tax implication.

    My whole purpose is to deposit money in family accounts to earn tax free interest away from tax complications.
    I will appreciate your clarifications. Thanx.

  5. sanjiv narang says:

    Sir,
    My query is regarding PPF, Whether after completion of 20 years PPF account can be extended or to be continued please clarify.

  6. Ajay Kumar De says:

    I so far maintain my PPF a/c in Esplanade Branch of SBI in Kolkata that was close to my place of work. I have since retired from service, and opened a/cs in Kalibabur Bazar Branch of SBI close to my residence having registered for ‘online sbi’ for convenience from home. Do I have opportunity of getting my PPF a/c in Esplanade Branch to Kalibabur Bazar Branch without taking trouble of visiting the so called home branch for PPF a/c. If such transfer anytime in middle of financial year shall cost me by way of problem in getting interest for part of the year from Esplanade and for other part from Kalibabur Bazar Branch ?

  7. Shanthi says:

    Hi,

    I have a question, I have opened the PPF account in SBI in the month of November ’12 by paying Rs.500/- I did not declare any lump sum amount.
    And there on I’m paying Rs.500 every month till today.
    AS per the PPF rule the minimum of Rs.500 and max – 100000 can be paid per year, it means only 500 should be paid for one year and in the next year again pay 500?
    Could you please suggest me on the above.? Is there any problem if pay 500 per month.

    And can you also advice me how do I mention the amount paid till today to PPF account in Tax investment proof?

  8. Nikunj says:

    I am confused about maturity date of my PPF. The SBI branch says deposit date is 27th march, 1999 while clearing dt.is 3rd April, 1999 so their system shows maturity date is 1st April 2015 ?

    Also, how can I avail a part of this invested money to use for further investment now? I wish to also extend it for another 5 years.

  9. rakesh kumar agrawal says:

    sir
    i open ppf a/c by ppf agent.all service like deposit widrawa pass book entry by authorize agent sbi ppf agent now all service closed by sbi ppf agent due to ppf commission discontinue .why commission stop

  10. K. CHANDRAN says:

    Please let me know as to how we can change the status of  minor PPF Account holder in SBI to Major. What is the Form for application for the same.  What is the procedure for changing the status from minor to major.

    Chandran

  11. Dr. S C Singhal says:

    Sir, 
    I want to know what is date of realisation of a cheque. To be very specific, I deposited a LOCAL cheque in my PNB PPF account on 2.4.12. Although it was a public holiday but the bank was open and I could put the cheque in the box provided. The Same was sent for clearing on next date I.e. 3.4.12. The amount was debited from my account on 4.4.12. But this amount was credited to my PPF account only on 6.4.12 as 5.4.12 was a holiday. Now my question is whether the date of realisation of a cheque is the date on which it has been debited from my account and credited to PNB’s account or the date when bank received the cleared cheque back. If the bank is right then no one in India would have been in a position to deposite  any amount in his PPF account by cheque before 5th of the month to claim interest for that month as 1:4:12 was a holiday. Please clarify with the copy of the rule.

    Thanks a lot

    Dr. S C Singhal

  12. RAJENDRA J PAWASKAR says:

    You have mentioned in  Frequently Asked Questions Quote:
    Q. Can the PPF account be attached by Tax Authorities?
    A. Yes, the PPF account can be attached by the Income Tax and Estate Duty authorities. The PPF act only gives the account holder immunity against attachment under a decree / order of a court of law.
    Please clarify whether it is mere attaching till maturity or payment also can be made immediately on receiving the attachment order u/s 226 (3) by the bank even though the PPF a/c is not matured for payment. If yes, pl quote the reference circular/letters.

  13. Mayuresh says:

    In event of transfer of PPF account how is the interest computed?

    The target bank where I recently transferred my PPF account claims they can pay
    interest only from the date they received the deposits from previous account
    office.

    The old account office on the other hand paid no interest whatsoever, which
    actually seems right as per the rules.

    The Govt documents cited below clearly state the rules, along with the
    rationale behind these rules (to avoid double compounding of interest and also
    because it’s ultimately Govt of India who is paying the interest):

    /www. indiapost.gov.in/POSB_Manual_Vol-I.htm
    Search for “transfer”.

    OR

    www. nsiindia.gov.in/pdfs/Chapter2-PPF-1968-partII.pdf
    p29-30: Rule 12

    As per these, it is the NEW account office, that holds the account as of 31st
    March, should pay interest for WHOLE year treating the account as continuous.
    Dates of deposit of previous balance should not matter for interest
    computation.

    Escalating this matter with my target bank’s Nodal officer etc. has drawn no
    response whatsoever. I think a big fight is due in this matter.

  14. H G Dattatreya says:

    There is an updated version on PPF in Taxguru d/d 26 jan 2012.This answers one of my queries on extension of PPF a/c. Thnx.Readers may see that. H G Dattatreya

  15. dattatreyahg says:

    Please refer my posting above d/d 10 dec 2011 , 20:58. Please correct to read the date in first line as 10 dec 2011, 10:50 (in place of 06 dec 2011)

  16. dattatreyahg says:

    Futrher to my posting above d/d 06 dec 2011. I happened to see InvestmentKit.com. Under FAQ in that website, an answer clearly states that extension in blocks of 5 years can be made any number of times. But I have no means to check whether it is valid even today as so many amendments have come in the past many years. [This is however not applicable to HUF as per a recent amendment]. Someone please help me with an authentic answer.

  17. dattatreyahg says:

    Sir, your statement at Para 12 and also your answer to Question 4 suggest that “The ppf a/c can be extended (after initial 15 years) for a period of 5 years ONLY, after which it has to be compulsorily closed and,if need be, a fresh a/c should be opened “.This has put me in serious confusion. After completion of 15 years( original a/c was started on 22 oct 88),my a/c has been extended twice each for a period of 5 years at SBI on an application by me (on a specifically formatted printed application form)duly approved by SBI Manager. On both the occasions,It was clarified to me (by SBI Executives and Postal authorities dealing exclusively with this subject) that such extensions are permitted any number of times in the Act itself as long as it is in BLOCKS OF 5 YEARS and also on specfic approval by Bank Manager on the prescribed Printed .Application Form. In fact, my third extension will be due shortly and I have to decide. I will be grateful for a clarification on this at the earliest as it is a matter applicable to many people and it has implications of exemption already availed under Sec 80 C . Kindly accord highest priority. [I may recall here that a lot of discussions on this subject had appeared in Tax Guru earlier also, but it did not provide a clear answer ] .

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