Public Provident Fund, or PPF, has been one of India's most popular investment options. There are many reasons for the popularity of PPF, including guaranteed returns, tax benefits on the amount invested, and tax-free returns. But, even though millions of Indians make PPF investments to achieve long-term financial goals, some aspects of this tax-saving investment are not well understood.
Extension After Maturity of PPF Account
After the completion of 15 years, the PPF account matures, and the account holder has to choose between 2 options:
Option 1: Withdraw the account balance and close the account
Option 2: Extend the account with or without additional contribution
The extension of a matured PPF account is now permitted in blocks of five years, and there is no restriction on the number of times this extension may be granted. However, the request for an extension must be submitted within a year after the PPF account's maturity. The PPF account will continue to accrue interest at the current rate during this additional term. The amount in the PPF account will continue to accrue interest at the relevant rate for the next five years if the extension is completed without any further contributions from the subscriber.
On the other hand, if the subscriber chooses to add additional contributions to the matured PPF Account. Both the current PPF balance and the new investments are eligible to receive interest at the current rate.
Minimum and Maximum PPF Contribution
In accordance with current PPF regulations, the account must receive a Minimum Investment In PPF yearly contribution of Rs. 500 to remain operational. PPF now only permits annual contributions of up to Rs. 1.5 lakh. The maximum annual contribution of Rs. 1.5 lakh is, however, liable to alter from time to time. A subscriber's excess deposits are considered irregular and are returned to them without interest if they total more than Rs. 1.5 lakh annually.
On the other hand, the PPF account would become inactive if a subscriber does not pay the required minimum yearly deposit of Rs. 500 in a fiscal year. A penalty of Rs. 50 must be paid each year a PPF account has been dormant to reactivate it. For each year the account was inactive, a minimum contribution of Rs. 500 was also needed, in addition to this penalty. Even so, you will still continue to earn interest on the account balance at the current interest rate even if you don't make the required minimum yearly contribution of Rs. 500.
PPF Account for Minors
Parents may create one PPF account in the name of a minor child, but each parent may only open one of these accounts. A parent and a minor kid may each contribute a maximum of Rs. 1.5 lakh per year to PPF. Therefore, if the parent deposits Rs. 1.5 lakh in the minor's PPF account in a fiscal year, that parent is not permitted to deposit an additional Rs. 1.5 lakh in his or her own PPF account. While grandparents are permitted to create PPF accounts in the names of their underage grandchildren, parents are not permitted to do the same. However, if a grandparent is a legal guardian, they may create a PPF account for their young grandkids.
Indians frequently invest in PPF accounts for children since they can help them accumulate tax-free funds. When the PPF account reaches maturity, which takes 15 years, the corpus can then be used for a variety of things, including the child's higher education costs.
The popularity of the Public Provident Fund in India has historically been fueled by the benefits of both assured returns and tax savings. The PPF account is one of India's most well-liked tax-saving investment alternatives, despite the ongoing decrease in interest rates, which has encouraged many to look for alternative investments. Try the Tax Reckoner online only at the website of Complete Circle. Visit now!
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