What is PPF?
Public Provident Fund (PPF) is a small saving scheme backed by the central government. It was initiated to provide retirement security to individuals and workers in unorganized sector.
Some rules about PPF account-
- It is a 15 years scheme. Public Provident Fund (PPF) account gets matured after 15 years from the end of the year in which the account was opened. However, on maturity this period can be extended any number of times for a block of 5 years each time. This can be done by submitting “Form H” within a year from the date of maturity.
- No premature closure of the account is allowed. Only in the case of the death of account holder, his/her nominee /legal heir can close the PPF account by submitting the required documents as guided by the Ministry of Finance.
- You can have only one PPF account in your name in your entire life.
- You can never have a joint account but can open a n account for a minor as his parent or guardian.
- A minimum of Rs. 500 is required to open and maintain a PPF account yearly.
- A maximum deposit of Rs. 1,50,000/ can be made in a PPF account in any given financial year.
Premature Closing Rules:
- The account holder can close his/her PPF account prematurely after finishing 5 years, on grounds like higher education of children or may be medical treatment expenditure. It means individual can close his/her account before the time of maturity, which is 15 years. It is a good thing, but there are conditions to this exception. The premature closing will result in a penalty of 1 per cent of the interest on the whole deposit.
- Account holder can make withdrawals from the sixth year which means that from the day account holder opens his/her account, he/she needs to complete 6 full financial years before he/she can make any withdrawals.
- Account holder is allowed to withdraw 50% of the balance at the end of the fourth year, preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.
- In a year only one withdrawal can be made.
- The amount once withdrawn cannot be repaid.
- On maturity that is after 15 years the entire fund can be withdrawn from the account.
For example, if an account was opened in the year 2004-05, and the first withdrawal was made during 2010-11, the amount that can be withdrawn is limited to 50% of the balance as on March 31, 2007, or March 31, 2010, whichever is lower.
Nominee and Death
- In case of sudden death of the account holder, the amount that’s remaining as balance in the account of the deceased account holder can be claimed by his/her nominee or legal heir, even before expiry of 15 years. The account cannot be continued. If the balance in the account is more than 1 lakh, then the nominee or legal heir needs to prove identity and provide with the relevant documentation to claim the pending amount in the PPF account.