Friday, December 23, 2011

PPF- Public Provident Fund.- Explained - Rate & Limit Hiked Wef. 1st Dec,2011


  • Eligibility- Individuals, individuals on behalf of minor
  •  Min- Rs 500 per annum in multiples of 5
  • Rs 1,00,000/- per annum (wef from : 1st Dec,2011)
  • Duration- 15 years, can be extended for one or more blocks of 5 years.
  • Account can be discontinued but the repayment of subscription and interest will happen only after 15 years.
  • Rate of Interest – 8.6% pa, credited in the account on the 31st of march and calculated on the minimum balance between 5th Day and the end of the month.
  • Loans – During the third to sixth year the account holder can avail the facility of loan of an amount not exceeding 25% of the balance standing to his credit at the end of the second financial year immediately preceding the year of loan application. The principal amount of loan under the PPF scheme is required to be paid either in lump sum or in monthly installments within a period of 36 months. After the principal amount is repaid the interest is to be paid in not more than 2 monthly installments at the rate of 1% per annum calculated for the loan period. If the loan is not paid in 36 months then it would attract an interest rate of 6% pa. Withdrawals – is possible from the PPF account, one withdrawal is permitted per year of an amount not exceeding 50% of the balance standing to his credit at the end of the fourth financial year.
  •  Clause of – “out of Tax payers income” done away with.
  • Renewal of the PPF account- As per rule 9 (3) of the PPF scheme, a PPF account can be closed by the subscriber at the expiry of 15 years. Rule 9 (3A) provides that on the expiry of 15 year period the subscriber can extend the PPF account for a further block of 5 years
  •  Rule 9 (3B) states that the subscriber shall be eligible to make one withdrawal every year subject to the condition that total withdrawals during the 5 year block shall not exceed 60% of the balance at the commencement of the block period.
  •  NRI’s , HUF’s cannot invest in PPF A/c’s. However if a resident subsequently becomes an NRI, he can continue to do the investments until the maturity period on a Non- repatriable basis.
  • Investments on behalf of minor- Can also be done (with a limit of 1,00,000). Since there’s no gift tax, it can be used for their education and this income will not be clubbed with the income of the subscriber.
  • Its free from any attachment by a court but is subject to attach under the order of IT authorities
  • PPF account can be opened only in an individual name and not in joint name.
  • One Person cannot open more than ONE PPF Account. - If, at any point, it is detected that you have two accounts, the second account you have opened will be closed, and you will be refunded only the principal amount, not the interest.