The most popular tax-saving instruments in India is Public Provident Fund. The contributions towards it get deducted from the taxable income. The interest gained on the deposits also gets exempted from tax deductions. Let us learn about PPF.
What are the tax benefits?
Under Section 80C of the Income Tax Act, 1961, you receive an exemption of minimum investment of Rs. 1.5 lakh. PPF falls under the EEE category, i.e., exempted at the investment stage, exempted at the stage of interest credited, and exempted at withdrawal time. The minimum lock-in period is 15 years. You can claim tax benefits for kids and spouse’s as well.
Can an individual open PPF for children?
Yes. You can open a PPF account for a minor either by the parents or the legal guardians. You open them in the name of the child and maintain them under the guardianship of the parents. The minimum deposit limit is up to Rs. 500 and the maximum is Rs. 1.5 lakh yearly. Remember, this account is applicable for your account and the guardian one. If you fail to deposit the minimum amount, there is a penalty of Rs. 50 every year.
What happens to a minor PPF account on maturity?
There are two cases:
- If the PPF matures before the child turns 18, the guardian can either opt to withdraw the amount or extend it up to five years.
- If the PPF matured after the child turns 18, they would become the account’s sole holder. It then becomes the child’s decision to withdraw or continue running the account.
What are the interest rates offered on the accounts?
For any PPF account, the interest rates remain the same and do not vary.
How does PPF get calculated?
You generally use the PPF calculator for checking the interest amount you will receive annually. The interest gets calculated on the lowest account balance between the 5th and the end of the month. This means, if you deposit on or after the 5th, they do not earn any interest for that specific month.
What if the PPF account was dormant or inactive?
If you fail to deposit a minimum of Rs. 500, your PPF account becomes inactive. In such cases, follow the mentioned steps:
- Submit a written request to the post office or the bank where you hold the PPF account.
- You need to pay a penalty of Rs. 50 yearly, until the account, is inactive.
- Contribute at least a minimum of Rs. 500 in your PPF account annually.
- Get the relevant documents, signature, and penalty verified by the post office. Note, the account holder should be available for verification.
- Once done, the dormant account becomes active again.
Most of the top banks nowadays offer the necessary instruments concerning the desired product on their portal, such as PPF interest calculator, information on tax benefits, etc.
