Saturday, January 24, 2009

Public Provident Fund (PPF)

Public Provident Fund (PPF)
can be opened in
1. Head Post-Office
2. GPO
3. Any branch of SBI
4. Selected branches of Nationalized bank like Central bank of India etc

Conditions
  • Minimum investment of Rs. 500 in a financial year
  • Maximum of Rs. 70,000/- in a financial year
  • can be invested in lump sum or in convenient instalments
  • you cannot deposit more then 12 times in a year

Interest

  • 8% p.a credited to the account, once a year, as on 31st March of each year.
  • Deposits made before 5th of every month are eligible for interest for that month. Date of deposit is considered for this purpose
  • Interest can be changed by the Government of India at any time

Past Interest rate were as under
upto 14.1.2000 - 12%
15.1.2000 to 28.2.2001 - 11%
1.3.2001 to 28.2.2002 - 9.5%
1.3.2002 to 28.2.2003 - 9%
1.3.2003 onwards - 8%

Term

  • PPF is 15 year account
  • The term of the account can be extended by 5 years at a time by making an application in specified form to the deposit office, within one year
  • An account can be extended any number of times
  • The entire balance can be withdrawn in full after the expiry of 15 years from the close of the financial year in which the account was opened.

Loan

  • The depositor can take a loan in the third financial year from the financial year in which the account was opened
  • loan can be taken upto 25% of the amount standing at the end of the second preceding financial year
  • The loan shall be repayable in 36 instalments and shall bear interest at the rate of 1%. No loan can be obtained after the end of 5th year.

Withdrawals

  • Depositor is permited to make one withdrawal every financial year.
  • withdrawal is permitted from the 7th financial year
  • Amount of withdrawal can not exceed 50% of the balance to his credit at the end of the fourth year immediately preceding the year of withdrawal or at the end of the preceding year, whichever is less

Tax Benefits

  • The interest earned on PPF account (including interest during the extension period) is excluded from income tax u/s 10(1).
  • The entire deposit in the account is exempt from wealth tax.
  • The annual contribution to the account is eligible for deduction u/s 80c

Transferability

  • A PPF account with one deposit office can be transferred to another deposit office

Nomination

  • PPF account is necessarily opened in a single name. Nomination facility is available
  • A depositor can nominate more than one person and stipulate the percentage of sharing among nominees

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