Public Provident Fund or PPF is one of the most popular investments around. It is a favorite of the conservative investors in India. PPF offers very high interest of 7.9% for the October to December 2019 quarter. It also enjoys the EEE tax benefit where your investment in PPF enjoys the Section 80C benefit up to Rs 1.5 Lakhs a year. The interest earned and amount withdrawn at maturity are tax free. PPF has a 15 year lock-in period.
PPF also enjoys a few lesser known benefits. The PPF balance can’t be attached by a court decree for recovery of any dues. Guardians can open PPF account on behalf of people with unsound minds. If you are the guardian of a people who is specially-abled; you can open the PPF in his/her name.
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Let’s take a look at the new PPF rules and how they affect you.
As per rules under the PPF Scheme 2019, premature closure of PPF account is allowed after the completion of 5 financial years. This is after the end of the year in which the PPF account was opened. The Government allowed premature closure of PPF account if a life threatening disease or a serious ailment affects spouse, account holder, parents or dependent children.
Premature closure was allowed even for higher education expenses of the account holder. As per new rules premature closure of PPF account is allowed if intended beneficiaries of the account are dependent children. You would have to show documents and fee bills confirming the admission in a recognized institute for higher education in India or abroad. Premature closure is allowed on change in the account holder’s residency status.
If you make a premature closure of PPF account, you get lower interest by 1%, than interest rate credited to the account.
See Also: How to Transfer PPF Account?
You can avail a loan against PPF from the third financial year of opening the account. The maximum loan amount allowed is 25% of the PPF balance at the end of the second year which precedes the year in which PPF application was made.
If you opened the account in May 2014, you are eligible for the first loan in FY 2016-17. The maximum loan you can get is 25% of the balance as on March 31st 2015. You must repay the principal within 36 months (3 years). The interest for loan against PPF must be repaid in 2 monthly installments.
As per old rules (PPF Scheme 1968) if you availed a loan against PPF, you would have to pay interest rate on the PPF loan at 2% above prevailing PPF rates. As per PPF Scheme 2019, the interest rate has been reduced to just 1% above prevailing PPF rates. This means if PPF interest is 8%, you must pay 9% for loan against PPF.
As per rules under PPF Scheme 1968, you could make deposits in multiples of 5. You were allowed a maximum of 12 deposits in a year. The PPF Scheme 2019 allows you to make deposits in multiples of 50. No specifications are made vis-a-vis upper limit on such deposits. You can make PPF deposits as many times as you wish, subject to maximum restriction. The minimum contribution in PPF is Rs 500 and the maximum contribution is Rs 1.5 Lakhs.
See Also: How To Open PPF Account Online?
As per rules of PPF Scheme 1968, NRIs cannot open PPF account. A resident Indian who subsequently becomes an NRI may continue to make contributions towards PPF account till maturity. The PPF scheme 2019 does not clearly prohibit NRIs from opening PPF account. It also doesn’t answer the question on whether a person who becomes an NRI could continue to contribute. You would have to make a declaration you are a resident of India in the account opening form which is Form 1.
You can draw a conclusion that the new PPF scheme is only for Resident Indians. Existing citizens who become NRIs cannot make further contributions to PPF account.
See Also: PPF Account Rules
See Also: What To Do If You Have Two PPF Accounts?
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