PPF Account Rules

PPF provides some amazing benefits and returns to the investor. However, there are some important PPF account rules that one must follow in order to invest in the PPF program.

Criteria of Eligibility

People who need to invest in a PPF account should fulfill the following eligibility criteria and follow the PPF account rules which are a must:

• The individual should be an Indian resident.
• One individual can not open two accounts at the same time.
• However, a guardian appointed by the court or the parents can open an account on a minor’s behalf.
• If the minor is an orphan and is living with the grandparents, then they can open the PPF account on behalf of the minor.
• The opening of a PPF account is not permitted for NRIs or HUFs. If they already have a PPF account in their name, it will continue to be operational until the account’s completion date. However, unlike in the case of Indian citizens, these accounts cannot be extended for 5 years.

Time Period

PPF rules of the time period are extremely important to adhere to: 

• The PPF account can be kept for 15 years.
• The maturity date is calculated from the end of the financial year in which the contribution was made; it does not depend on the date and month when the account was opened.

For instance, if an initial deposit is made on November 1st, 2021, the maturity date will be calculated from 31 March 2022, and the account will mature on 1 April 2037.

Contributions

• The total number of contributions that can be made by an investor is 16.

Amount That Can be Contributed

PPF account rules in relation to the contributions that can be made during the time period your account is valid:

• The minimum amount that can be contributed is INR 500. 
• The maximum amount that can be contributed is INR 1.5 Lakhs.

Interest Calculations

PPF Account rules in order to calculate the interest on the amount which you are either depositing or which is in the account already:

• The current rate of interest on the PPF account is 7.1% p.a.
• The interest is calculated from the 5th day of the month to the last day.
• If deposits are made in lumpsum, then it is advisable to make the payment by April 5th.
• Interest is calculated on a monthly basis.
• If the payment exceeds Rs. 1.5 lakhs, then there will be no interest applicable on the excess amount.

Loans and Partial Withdrawals

PPF rules to comply with in relation to Loan and Partial Withdrawals:

• The balance in the PPF account and the number of years are considered for partial withdrawals and availing of loans.
• Interest charged on a loan is 2% more than that earned for deposits in the account.
• The principal amount gets added to the account and the interest paid will go to the government.
• One can avail of only one loan at a particular time.
• If someone is availing of the partial withdrawals, then that individual will not be eligible to apply for a loan.

Benefits from Taxation

• Individuals can avail of tax benefits in the PPF account under the section 80C of the Income Tax Act
• The interest that is generated on the deposited amount in the PPF account is also exempt from tax.
• If a partial withdrawal is made and that too prematurely, then the amount will be exempted from tax as well.
• The declaration of the same is mandatory while filing the Income Tax Return

Account Discontinuation

PPF account rules in relation to the discontinuation of the PPF account.

• If an investor discontinues the PPF account, he/she will not be able to make any partial withdrawal or avail of any loan.

Account Extension

• Investors can extend their maturity period in blocks after the tenure period.
• The block consists of a time period of 5 years, and an investor can extend the account innumerable times.
• If no contributions have been made, interest will be generated on the present amount.
• In the extension period, an investor is allowed to withdraw once in every financial year.
• The maximum amount that can be withdrawn is 60% of the amount present in the account during the time of the extension.

Exemption in Wealth Tax

• The amount contributed to the PPF account is also exempted from the wealth tax.

Closing the Account Prematurely

PPF account rules in relation to the closing of the account prematurely

• Closing of a PPF account prematurely is allowed only under certain conditions.
• The closing can only be initiated after the account tenure of 5 years.

Court Mandate

• The amount in the PPF account cannot be used to pay off any sort of liability or debt.

Sanctions

• The inability of an investor to pay the minimum amount, i.e., Rs. 500, will result in the inactiveness of the PPF account.
• Every year (the account has been inactive) the investor has to pay Rs. 50 to bring it back to the active status.
• The minimum contribution and the penalty amount are to be paid together.

Nominees

• An investor can add nominees either at the time of opening the account or during the scheme tenure.
• Minors can also be added as nominees by the account holders.
• If the PPF account has been opened on a minor’s behalf, then one cannot add a nominee.

Account Transfer

• Investors can transfer their PPF account from the post office to the bank and vice versa.
• The PPF account can also be transferred from one bank’s branch to another.

The above-mentioned PPF rules and sanctions are mandatory to keep in mind if one has opened or is going to open a PPF account.