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PPF New Rules

Recently the Government of India notified new rules for public provident funds or PPF accounts for the benefit of account holders. PPF is one of the most popular small savings schemes and it offers a guaranteed return. PPF accounts have a maturity period of 15 years and the government announces interest rates for each quarter. PPF currently fetches an interest rate of 7.1% per annum. Interest is calculated for a calendar month on the lowest balance at the credit of an account between the close of the fifth day and the end of the month. Interest is credited to the account at the end of each year.

Here are the new PPF rules explained in detail.

  • According to new PPF deposit rules, an account holder can make deposits in multiples of Rs. 50 any number of times in a financial year, with a maximum of a combined deposit of Rs. 1,50,000 a year. Earlier, a maximum of 12 deposits was permitted in 1 year.
  • The government allows premature closure of PPF accounts only under specific circumstances only after five years after account opening. Under current rules, premature closure is allowed for 
    • Treatment of life-threatening disease of the account holder, his spouse or dependent children or parents, on the production of supporting documents and medical reports confirming such disease from treating medical authority.
    • Higher education of the account holder, or dependent children on the production of documents and fee bills in confirmation of admission in a recognised institute of higher education in India or abroad. Now, the government has added one more criterion for premature closure of PPF account: On the change in residency status of the account holder on production of a copy of passport and visa or income tax return.
  • An account holder can take loans from PPF accounts. Under the new rules, the rates at which the account holder can borrow from his account has been reduced to 1% above the prevailing PPF interest rate, from 2% earlier. In case of death of the account holder, the nominee or legal heir shall be liable to pay interest on the loan availed by the account holder but not repaid before his death. Such amount of due interest shall be adjusted at the time of final closure of the account.
  • The Department of Post, through a notification dated December 2, has allowed deposit of post office savings account cheque of any amount into your PPF account, subject to an overall limit, at any non-home post office branch. The earlier limit was Rs. 25,000. The same rule applies for post office recurring deposits, PPF and Sukanya Samriddhi accounts.
  • AII POSB cheques issued by any CBS Post Office, if presented at any CBS Post Office should be treated as at par cheques and should not be sent for clearing. POSB cheque can be accepted at other SOLs or service outlets (without the restriction of amount, for credit in POSB/RD/PPF/SSA accounts, subject to the limits, if any, prescribed in the scheme.

About PPF

PPF Account is a long-term saving scheme which gives all-round tax benefit. It is a preferred investment option since it is backed by the Government of India and comes with an attractive interest rate and guaranteed returns. These returns are entirely exempt from tax under Section 80C of the Income Tax Act. Investors can save tax ranging from Rs. 500 to Rs. 1,50,000 in a given financial year, and can get facilities such as loan, withdrawal, and extension of account.

Closing a PPF account is not straightforward. The government has put some restrictions on withdrawals and PPF Account Closure. The rules are the same whether you have opened a PPF account in the post office, SBI, ICICI or any other bank.

FAQs: PPF Rules

1. How many partial withdrawals are allowed per financial year, starting from the 7th financial year after the PPF account creation?

Only one partial withdrawal will be allowed every financial year (starting from the 7th financial year onwards).

2. Is there a separate PPF closure form?

You are not required to submit a form for the account closure. Once, your PPF account becomes vacant the account closes itself. Thus, the PPF withdrawal Form can be considered as the PPF account closure form. Note, your PPF account would not close unless you withdraw the full amount.

3. Can a person have 2 PPF accounts?

No, one person cannot have 2 PPF accounts. However, a family is eligible to have multiple PPF accounts, a parent or guardian of the family can have individual accounts of their own and one of them can also open a PPF for a minor child (if they have any).

4. What is the PPF lock-in period?

Investments made to a PPF account have a lock-in period of 15 years. However, individuals can make a partial withdrawal from the PPF account after 5 years from the date of opening the account.

5. Can I withdraw PPF after 5 years?

The Government has amended the PPF scheme and propagated some positive changes regarding the withdrawal of balance from the account. You can now withdraw the whole amount and close your PPF after 5-years.

End Note

The Public Provident Fund (PPF) scheme comes with a lock-in period of 15 years. There are some strict guidelines and procedures regarding the withdrawal of your PPF amount. It is important to know about this withdrawal process, taxability, premature withdrawal, loan facility, etc. before you withdraw it.

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