An individual can invest in a PPF scheme either through a bank or a post office. The scheme has a lock-in period of 15 years and can be extended by 5 years at a time.
Public Provident Fund (PPF) scheme was introduced for the middle class section of the society wherein the deposits required are very low, cost-effective and affordable. The PPF accounts are tax-free, can be accessed easily and are simple to understand.
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Under the Section 80C, the interest earned as well as the maturity proceeds of the PPF investments are tax-free.
An individual can invest in a PPF scheme either through a bank or a post office. The scheme has a lock-in period of 15 years and can be extended by five years at a time.
Traditionally, an individual cannot withdraw money from a PPF account. However, it does provide some liquidity under certain conditions, Bankbazaar.com said.
Here's how you can make the most of your PPF account
An individual can invest as low as Rs 500 to a maximum of Rs 1,50,000 in a fiscal year to their PPF account. The contributions can either be made in a lump sum or in 12 installments.
The rate of interest is calculated on the minimum balance in the PPF account between the fifth and the last day of every month, which makes it compulsory for the individual to invest before the fifth of every month.
In case an individual has idle money at their disposal, they can also invest a lump sum amount of Rs 1.5 lakh on or before April 5 to earn interest for the entire financial year.
An individual can take out a loan of 25 percent of the balance amount available against the PPF account from the third fiscal year till the end of the sixth fiscal year.
The loan, however, has to be repaid within 36 months and can be availed only once a year. Hence, a new loan can only be applied once the old loan has been repaid fully.
A partial withdrawal each year from the PPF account can be made from the seventh year of opening the account, which is tax free. A PPF account comes with the maturity of 15 years.
The withdrawal limit from the PPF account is capped at 50 percent of the total balance at the end of the fourth year immediately preceding the year of withdrawal.
An individual can keep their PPF account even after maturity without making any new investment, where in they can earn interest on the balance until the account is closed. In case, they wish to make new investments, the account can be extended up to five years. There is no limit on the number of times the account can be extended.
The PPF account gets deactivated if a minimum amount of Rs 500 per year is not deposited in the account. An individual is eligible for loan and partial withdrawal facilities only when the account is active.
In case you need to activate the PPF account, visit the bank branch or post office where your account was opened and submit a written request. The bank may charge a small penalty of Rs 50 for each financial year the account was inactive.
First Published: Feb 6, 2019 2:20 PM IST
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