New Delhi, Sep 24: Despite a number of saving schemes available in the market, the Public Provident Fund (PPF) continues to remain a popular one. PPF accounts are an investment avenue with decent returns coupled with income tax benefits.
The public provident fund is established by the central government. One can voluntarily open an account with any nationalized bank, selected authorized private bank or post office. The account can be opened in the name of individuals including minor. There is a lock-in period of 15 years and the money can be withdrawn in full after its maturity period. However, pre-mature withdrawals can be made from the start of the seventh financial year.
After 15 years of maturity, full PPF amount can be withdrawn and all is tax free, including the interest amount.
The following are certain rules regarding the options when a PPF account matures:
- A PPF account can be closed after the expiry of 15 financial years from the end of the year in which the account was opened.
- The subscriber can retain his/her PPF account after maturity without making any further deposits for any period without limit.
- The balance in the account will continue to earn interest till it is closed.
- The subscriber can make one withdrawal of any amount in each financial year.
- If the subscriber wants to make further contributions after the PPF account matures, it can be extended in blocks of five years.
- There is no limit on the number of times you can extend the PPF account.
- But if the PPF account holder wants to continue with the contribution-mode after maturity, he/she has to submit Form H within one year from the date of maturity of the account.
- If the subscriber fails to submit Form H but continues to make deposits in the account, the fresh deposits into PPF account will not earn any interest.
- Also, in this case, the fresh deposits in the PPF account will not be eligible for deduction under Section 80C of the Income Tax Act.
- In case the person has opted to extend his account by a block of five years, during each block period he/she can make one withdrawal not exceeding 60% of the balance at the commencement of each block. This amount can be withdrawn either in one installment (one year) or in more than one installment in different years, not exceeding one withdrawal in a year.