PPF stands for Public Provident Fund Account. These are the accounts initiated by the Government of India for long term investments. They are savings accounts for 15 years and can’t be opened earlier except in certain conditions. They yield fixed and guaranteed returns. Hence, it can be termed as an investment plan instead of a kind of savings account. The first PPF account idea was introduced in the year 1968 under the finance ministry.
Most people consider PPF as one of the best options for retirement plans as it is a long term investment with a high return plan. When we say it is on a strict time period of 15 years we mean that the maturity period cannot be less than 15 years but on choice and will, the period of the facility can easily be extended as much as anybody wants to. PPF is an attractive and considered option because not only it yields high returns but also saves a lot on taxes as the facility is tax free under section 80C of the Income Tax Act.
PPF is a safe investment option as it is guaranteed by the government of India. The range of investment per year may vary from Rs. 500 to Rs. 1,50,000. The benefits of PPF are many , you can open a PPF account in any bank of India but in this article we will learn about the benefits of opening a PPF bank account in the Post Office.
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PPF accounts in the post office : All you need to know
There are a number of things that a person considers before opening a bank account. Here we will learn about everything about opening a PPF account in a post office- eligibility, tax process, duration of maturity period, loan, benefits, and a lot of other things as well.
Whenever we start a new fund for a bank account, we tend to look at the criteria for application. If we meet that particular criteria then only we are supposed to go further with our application. The eligibility criteria differs from institutions to institutions, policy to policy, to necessities. There is like such a criteria for the PPF accounts at the post office. But unlike many other policies and bank accounts, it is rather much simpler and less complicated. Here is the eligibility criteria one needs to fulfil to start a PPF account in a post office:
- The person should be an adult i.e. above 18 years of age.
- The person needs to be a legal citizen of India.
- A guardian/parent or any adult person of sound mind can open a PPF account on the behalf of a minor kid under their surveillance.
- The person should not be holding another PPF account in any bank or post office across the country.
These 4 are the simple eligibility criteria one needs to fulfil to have a PPF account in a post office.
Money deposition is one of the key aspects one needs to keep in mind before opening any account. This includes the range of minimum and maximum limit of deposit. The wider the range the more convenient it is for the customer to invest in such an account. The PPF account does have this wide range and allows its customers to deposit money in that range, it also allows the customers to invest in very minimal instalments. Here are all the facts you need to know about depositing money in a PPF account in a post office:
- The minimum limit of depositing money is Rs. 500 in a financial year.
- The maximum limit of depositing money in Rs. 1,50,000 in a financial year.
- The amount can be deposited in the minimum instalment of Rs. 50.
- The money can be deposited in any form either cash or cheque.
These were the criteria of depositing money per financial year in the PPF post office account.
If we look at the eligibility criteria, we found that a person cannot have more than one PPF account across the country. In case a person wants to start a new PPF account he/she has to get the old one closed. There might be another reason as well to close a PPF account which includes the maturity period has passed by, the account holder is in urgent need of money and a number of other reasons as well. These were the situations where the account holder themselves closes the account but there are scenarios in which the account automatically gets discontinued over time. Here are given the circumstances in which the discontinuation of PPF account is likely to happen:
- In in any year the minimum deposit limit i.e. Rs. 500 is not deposited in the PP account, then the account shall discontinue.
- A discontinued account can be activated by the account holder by paying a deposit fee of Rs. 500 and Rs. 50 for each year of non deposit.
- Loans/ interests can not be applied on a discontinued account.
These were the key points one needs to keep in mind in case of discontinued PPF account
When we say that PPF is not just any account but it is an investment made with a long term goal, we do consider the interest we get on that investment. An investment is considered great only when there is a guarantee and security of assured returns made. It is one of the safest investments because these funds are initiated by the Government of India, the return rate on these funds may vary as per the guidelines of the government but the surety of returns on these funds is guaranteed. Here are key features one needs to know about the interest gained on the PPF accounts:
- Interest is applicable as given by the finance ministry quarterly.
- The interest is calculated on the month with the lowest balance.
- Interest is credited to the account at the end of every financial year.
- No tax is applicable on the interest earned.
These were the key points about the interest earned on the PPF account.
The credibility of a bank account is also determined on the fact that how it is to get a loan on that particular account. PPF is a form of investment and savings account which makes it easier to get a loan on these kinds of accounts as the savings in the account can be used as a collateral. There are a number of benefits of taking a loan on the PPF account. Here are mentioned some of those features of applying loan on a PPF account:
- You can apply for a loan on the PPF account one year after the expiry of the first financial year on that particular account.
- Loan can be taken till 6 years from the year when the account started.
- Loan can be taken when 25% of the loan amount would be present in the bank account one financial year prior to the loan application.
- Only one loan can be taken in a financial year.
- If the loan is paid within 36 months then only 1% interest rate would be charged whereas if the loan is repaid after 36 months then 6% interest rate would be charged.
These were the key features one needs to keep in mind while applying for a loan on the PPF account.
Liquidity is one of the key features for any investment or account. The easier would be the withdrawal of money, the more likely people are to invest in a particular fund or account. Here is the scenario for money withdrawal in the PPF account:
- The account holder can make one withdrawal after 5 years of the expiry of the first financial year.
- Withdrawal can be made upto 50% of the balance to the end of previous financial year.
These were the cash withdrawal scenarios from a PPF account.
The fund is said to be matured when there are no constraints on the cash withdrawal. The account holder may even take upto 100% of the balance in the account post the maturity period. The maturity period of the PPF account is 15 years. There are a number of benefits that the PPF account holders enjoy post the maturity of the funds. Here is a list of all the benefits and features enjoy by the PPF account holder post the maturity of the account:
- Can submit the account closure application and can close the account.
- Can keep the amount in the account itself without the obligation of a necessity deposit every year, the interest will still be applicable on the account balance and it can be withdrawn anytime.
- Can extend the period of fund with the block of 5 years.
- Even in the extended duration account 1 withdrawal can be made each year that too upto the limit of 60% of the account balance.
These are the benefits that the account holder enjoys post the maturity of the PPF account.
These are the cases that are generally not considered in the ideal situations yet there are loopholes made for the conditions like these, it includes premature closure of the fund, nominee change, death of the account holder, etc. here are the given scenarios that may prevail in case of extreme situation:
- A premature closure is allowed after 5 years of the end of the first financial year.
- There are certain scenarios in which the premature closure will be allowed:
- The account holder or their spouse or children is suffering through a life threatening disease.
- Education purpose of the account holder or their dependent children.
- In case of death of the account holder, the account shall be closed and no more deposits can be made.
- In case of closure of account due to death, the interest will be paid to the preceding month of account closure.
These were the extreme case scenarios for a PPF account.
PPF accounts can be useful for people willing to make a long term safe investment. You need to go to a bank to open this account, instead you can go to your nearest post office and start a PPF account. The benefits of a PPF account across the country are the same. PPF account is an initiative under the finance ministry making it a secure form of investment. If you wish to start a PPF account consider the points given above.
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