This post carries some highlights on the basic PPF rules and important features of PPF (Public provident fund). Though I have already covered details on PPF in my earlier article, still looking at the comments section I found that many things are still not clear to the investors. (Read: All you wanted to know about PPF).
So the idea of writing this post is to stress on the important ppf rules which you want to understand. But if you want to understand PPF in detail, you have to visit the previous article only.
PPF is among one of the best investment options in India. Where it offers tax-free interest, it is also eligible for saving u/s 80C of Income tax act. It is a very important instrument to be used in an asset allocation for long-term investment.
PPF Rules – Some important basic features of the Public provident fund (PPF):
- The maximum limit on deposit amount in PPF is Rs 1.50 lakh per financial year. This limit is on total deposit which includes your personal account and your minor child’s account in which you are a guardian.
- You cannot open more than one PPF account in your name. But you may open different accounts in the name of your family members. Like in the name of your spouse and your children (Minor/Major) or person of unsound mind (as per PPF 2019 rules).
- You may also deposit Rs 1.50 lakh in each of your family members’ PPF account. But do remember the point no. 1 mentioned above. Tax saving u/s 80C can be claimed only on the deposit of Rs 1.50 lakh. If your spouse or major child has some taxable income than you may consider gifting them some money to deposit in their PPF accounts for tax saving or otherwise to earn tax-free income. But be sure to the Income-tax clubbing provisions.
(Also Read: Gift tax rules to save Income tax)
Also, do note that if you open 2 accounts for self (one in the bank and other in Post office) or you deposit Rs 1.50 lakh in all accounts (yours and your minor kid’s) and get caught then you will be refunded the extra amount deposited without any interest.
- Public provident fund account can be extended for any number of times after the expiry of its tenure of 15 years. The extensions will be for the block of 5 years.
- The interest rate in PPF will be announced every quarter along with other small saving scheme Interest rates. Unlike earlier, now one cannot predict the future value of the deposits made in PPF every year. Though PPF should be an integral part of one’s debt portfolio due to its tax-free interest feature, still from investment planning and asset allocation perspective one should re-balance the allocation every year and understand the other debt investment options along with it.
- Nomination facility is available in PPF and one should use this facility judiciously. Since if the nomination is not mentioned in the PPF account, your heirs may have to face many hassles in claiming the amount above Rs 1 lakh lying in PPF account. (Read: Importance of Nomination).
- PPF has 15 years lockin but you can get a loan and also opt for premature withdrawal after a certain period of time.
- NRIs are not allowed to open PPF accounts. And as per the notification isued in October 2017, if they have one PPF account while being in resident status, then the PPF account will stand closed form the day they turned into NRI
Public provident fund or PPF is a very important and must have instrument in one’s investment portfolio. But one has to have clarity on its provisions and basic ppf rules so that one can make the optimum use of the instrument to achieve its future life and financial goals.
Hope now, you are clear on basic ppf rules and features of Public provident fund. If you have any query on PPF, feel free to ask in the comments section.
I have a PPF account in my name.I am now an NRI for the past 4 years.Very soon I will get my citizenship here.What are the implications for my PPF account? Can NRI’s hold PPF account? What about NRI’s who accepted foreign citizenship? Do I have to close the account?
Karthik, you don’t have to close your account. Just inform your bankers where you have your PPF account about your changed status and you may continue with your account till its maturity. You may also continue with your deposits in this account to earn tax free interest.
Upon resignation after two years working in a Public Ltd. Company, my daughter opted for withdrawal of PF amount (inclusive of her contribution+Int+Employer’s Contribution+interest thereon). Since she joined a new private company which do not have PF facility. However, she has a PPF Account. In the absence of PF facility by the new employer, please advise whether the entire PF amount, as aforesaid, so withdrawn can be transferred/deposited to her PPF Account and what would be the tax implications thereon and whether she would be permitted invest a further sum of Rs.1 lakh u/s 80C this year also (apart from deposit of her PF amount as aforesaid which she would not claim again u/s 80C). Kindly send me the reply to my email id ([email protected]).
With best regards. Narayanan
See, PPF deposit doesn’t ask for any source of funds. You may deposit the PF amount that you have recently withdrawn and there would be tax implication of this transaction. The amount deposited by you in any financial year upto Rs 1 lakh can be claimed as tax deduction u/s 80C and you cannot deposit more than Rs 1 lakh in any financial year.
i have a ppf ac in my name and also one in the name of my son i would like to know if i can deposit Rs 150000 as per the new budget in each of the accounts held although i will be claiming sec80c benefits in my personal ac and not that of my son is it permissible the Deposit of rs 1,5 lac each and interest earned on same
Ryan. You can deposit Rs 1.50 lakh only as a combined deposit in yours and your son a/c. You can’t deposit Rs 1.50 lakh in both accounts
I have deposited 150000 in my childs account who is a major and dependent will I be able to Claim deduction u/s 80C for the money paid into my childs account I have not Deposited any amount in my PPF account
Yes. You may claim tax rebate u/s 80C on depositing money in your major child’s account. Refer this link https://www.tribuneindia.com/news/business/contribution-to-son-s-ppf-a-c-fetches-rebate/313966.html
Hi, I liked the way you have described the public provident fund (PPF) scheme is a popular long term investment option that is being backed by the Government of India. It provides interest rates and returns that are fully exempted from tax.
I was having a PPF account in Post office but due to inconvenience I discountinued it. As I was not aware that only one PPF account can be opened I opened an account in SBI without closing the previous account in Post Office. But after opening the new account I didn’t deposit any amount in the old account. Please advise what should I do.
I don’t think there is any provision to merge the accounts. The best solution I could think of is to continue both the accounts, with one keeping active by depositing the minimum amount every year.
I have recently closed a PPF account in the post office. Can I deposit the entire maturity amount(more than Rs. 1.5 lakh) in another new PPF account which I propose to open in a bank.
No. You cannot invest more than Rs 1.5 lakh in a year in PPF account