All you wanted to know about the Public Provident Fund.
By Larissa Fernand | 10-01-14 | Larissa Fernand is Web Editor for Morningstar.in
- Being a sovereign-backed instrument, it offers the highest safety.
- The rate of interest is fixed every fiscal and benchmarked against the yield of central government securities of comparable tenures.
- The current annual return is 8.7%.
- The rate of interest is compounded annually.
- Only Indian citizens can open a PPF account, NRIs and foreigners are not permitted to do so.
- If you attain NRI status after the account is opened, you are permitted to continue maintaining it.
- The money in a PPF account is not repatriable.
- Parents can open an account in a minor’s name but the total amount invested in the parent’s and minor’s account should be maximum Rs 1 lakh, which is the limit under Section 80C.
- Account holders are given a passbook to keep track of deposits, interest earned, withdrawals, loans and account balance.
- Each individual is eligible to hold only one PPF account.
- A PPF account can only be opened in an individual’s name and cannot be a joint account.
- A PPF account can be nominated and it is wise to do so. The nomination can even be cancelled or updated by filing a fresh request.
- Investments in PPF offer a deduction under Section 80C of the Income Tax Act.
- The minimum investment under PPF is Rs 500/annum and it can go up to a maximum Rs 1 lakh, which is the limit under Section 80C.
- Investments in PPF need not be made at one go but can be done in installments, up to a maximum 12 in a year.
- The principal amount invested gets a tax deduction under Section 80C. The interest earned is also tax free. On withdrawal, the principal and interest accumulated are exempt from tax.
- Investments in a PPF account cannot be attached under any court order with respect to any debt or liability of the account holder.
- The tenure of a PPF account is 15 years.
- Though the lock-in period is 15 years, investors are permitted premature withdrawals and are even offered the facility of a loan.
- Once the 15-year tenure has been completed, the account holder has three options: extend it by a 5-year block, close the account and withdraw all his money, or leave the account idle. The PPF account will continue to earn the designated rate of interest every year.
Source : http://goo.gl/l2Xf1y