The stock markets are crashing. As International crude oil prices cross $85 Dollars a barrel, petrol and diesel are on the boil. Petrol prices in Maharashtra had crossed Rs 90 a litre and even after Finance Minister Arun Jaitley cut excise duty on petrol and diesel by Rs 1.5 and asked oil marketing Companies like IOC, BPCL and HPCL to absorb a Re 1 fuel price deduction, times are tough. All BJP-ruled states cut fuel prices by Rs 2.5 taking the total price reduction on petrol and diesel to Rs 5.
We are at Rs 74 vs Dollar as the US imposes sanctions on Iran. The trade war between US and China, the Fed rate hike, all of this has made the BSE Sensex crash 800 points on Thursday and a further 792 points on Friday as RBI kept the repo rate unchanged at 6.5%. All this means investors are rushing to the safe haven of FDs and the Public Provident Fund popularly called PPF. Banks are offering higher FD rates and the Government has hiked interest rates on small saving schemes like PPF. PPF offers interest of 8% effective October 1st 2018.
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PPF is the favorite investment of many citizens in India. Principal deposited and Interest earned, both enjoy a Sovereign guarantee. Returns are tax-free. An investment that has so many benefits needs a closer look.
1. What is PPF?
PPF is an investment cum tax-saving scheme. The goal of the PPF is to cultivate the habit of saving, among crores of citizens in India. You can open PPF with a minimum of Rs 500 and a maximum of Rs 1,50,000 a year at any designated bank branch or post office. PPF has a lock-in of 15 years and can be extended indefinitely in blocks of 5 years.
A person of any age can open a PPF, but must be a resident Indian. You can deposit a maximum 12 times a year. Make the deposits before the 5th of the month to earn interest for the full month as interest is calculated on the lowest balance between the 5th of the month and the end of the month.
You are allowed to make partial withdrawals from PPF and even avail loan against PPF.
2. PPF interest rates:
PPF offers interest rate of 8% effective October 1st 2018. Interest rates on PPF are revised by the Government each quarter. This is based on Government Securities Yield.
3. PPF in minors name:
A father or mother can open a PPF on behalf of minor son or daughter. Both parents cannot open a PPF account for the same minor. Grand parents cannot open PPF in the name of grandchildren. They can do so, only if the child’s parents are not alive and the grandparents are the legal guardians of the child.
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Only one PPF account can be opened either at post office or bank. You have to declare this when opening the PPF. If you have a PPF account at the bank, you cannot open at the post office and vice versa.
What happens if you open two PPF accounts by mistake? The second PPF account will be considered irregular and no interest will be offered on it. You will have to amalgamate both the accounts and for this, you must write to the Ministry of Finance (Department of Economic Affairs).
Premature closure of PPF account is allowed after completion of 5 financial years and for reasons like treatment of life threatening illness of self (account holder), parents, spouse or children. You need to provide supporting documents from a competent medical authority.
Premature closure of PPF account is also allowed for higher education in India or Abroad on production of documents, fee receipts and proof of admission.
You have to fill the Form E to make a nomination on PPF account and avoid legal hassles.
You can nominate more than one person to PPF. There is no upper limit on the number of nominees.
If subscriber of the PPF account dies, the nominees can claim the money by submitting Form G and proof of death (death certificate) of the subscriber.
PPF enjoys EEE benefit or the exempt exempt exempt status. You get the Section 80C tax benefit up to Rs 1.5 Lakhs a year. Interest earned and the amount withdrawn at maturity is tax free.
Take a look at this example. If you have opened a PPF in the financial year 2015-16, you can get a loan from the financial year 2017-18 till financial year 2020-21.
The loan amount is capped at the maximum of 25% of the balance available at the close of two years immediately preceding the year in which the loan is being applied for.
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