PPF account Archives -

How To Open A PPF Account For A Minor?

Mon, 26 Jul 2021 05:55:21 +0000

The Buyt Desk

Public Provident Fund (PPF) is a Government-backed savings scheme. You can use it to create a retirement corpus. Contrary to a low savings account interest rate, the interest rate of a PPF account is high. The current annual rate of interest is 7.1%. PPF scheme also provides a tax rebate.

As a parent, you plan to save for your children’s future. PPF schemes can fulfill this desire. There is no specific age for opening a PPF account. Thus, you can open a PPF account for your children from their birth. In this way, a corpus will be ready for their needs. After 18 years, the account can be transferred in your child’s name, and they can decide its future course.

Documents for opening PPF account for a minor

A parent can open a PPF account for a minor child by filling the account opening form. There is a requirement for the following details and documents for opening the account.

Entire details of the legal guardian or parents, the child in the form
Proof of age of the minor (Aadhaar card of the child or the birth certificate)
A passport size photograph of the parent or the legal guardian
KYC documents of the parent or the legal guardian
A cheque for the initial contribution of Rs.500 or more

The way to open a PPF account for a minor

You can open a PPF account for a minor at a branch of the post office. You can also visit a designated branch of a bank to open an account. Fill the account opening form, attach the required documents and submit them at a branch. Banks also open a PPF account online instantly through the internet or mobile banking.

Tax rebate for PPF account of a minor

The investment amount, the interest generated, and the maturity amount are tax-free under the PPF scheme. Additionally, you can avail Rs.1.5 lakhs tax deduction for investing in the PPF scheme under Section 80C in the ITR. You can claim a cumulative tax rebate of Rs.1.5 lakhs for all of your PPF accounts (either personal or child’s).

Points to remember for a minor’s PPF account

Only one among father, mother, legal guardian can open a PPF account for a minor.
The minimum contribution is Rs.500, and the maximum contribution is Rs.1.5 lakhs for the PPF account of a minor in a year. However, you can deposit just Rs.100 at the time of opening the account. A person can contribute a maximum of Rs.1.5 lakhs towards multiple PPF accounts (whether personal or a child’s).
It is mandatory to register a nominee when opening a PPF account for a minor.
After 5 years of opening the account, premature closure of a minor’s PPF account is possible for their medical or educational expenses. Also, you can take a loan against the PPF account for the welfare of the child.
It is mandatory to transfer the PPF account in the child’s name once he reaches the age of 18 years.

To conclude, the process for opening a PPF account for a minor is simple. Financial discipline from an early age is a good habit. Cultivate it in your children by opening a PPF account for them. Moreover, a PPF account for a minor is helpful because of the premature withdrawal option for a need.

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What Options Do You Have When Your PPF Account Matures?

Thu, 13 May 2021 10:10:54 +0000

The Buyt Desk

Public Provident Fund (PPF) is a Government scheme that can help you to generate wealth for the future. Every Indian, even a minor, can open a PPF account. However, NRIs are ineligible to invest in PPF. You can deposit Rs.500 to Rs.1.5 lakhs in a financial year in the PPF account. The current rate of interest for the PPF scheme is 7.1%. The Government announces the rate of interest every quarter. The scheme locks in the funds for a period of 15 years. Partial withdrawal (50% of the corpus in the last financial year) is possible after 5 years of opening the PPF account.

Advantages of PPF

It is a risk-free investment because it is a Government-backed scheme and provides assured returns after its term.
It allows you to accumulate wealth for long-term financial goals like retirement or a child’s education.
Under Section 80C of the IT Act, you can receive a tax benefit of up to Rs.1.5 lakhs by investing in PPF.
In PPF, capital, interest, and withdrawal amount are tax-free. It is an investment under the EEE (Exempt-Exempt-Exempt) tax category.

Disadvantages of PPF

The interest rate is not so high. PPF cannot counter inflation in the long run.
There is an annual capping of Rs.1.5 lakhs on the capital amount.
You cannot open a joint PPF account.

Options after completion of lock-in period

You can close the PPF account and withdraw the corpus.
You can extend the account for 5 years without making further contributions. The extension of the PPF scheme is possible in blocks of 5 years as many times as you want in a lifetime. In case of extension without a contribution, the accumulated corpus continues to earn interest. If you have not given maturity instructions to the bank or the post office, this will be the default option. It is best to opt for this option if you do not need the money urgently. However, you can still make one withdrawal every financial year. The withdrawal amount is not fixed.
You can also extend the account for 5 years with a yearly contribution. In this option, you can withdraw only 60% of the accumulated corpus that was available before the start of the extension period. The withdrawal is possible once in a financial year. You are at a huge disadvantage if you forget to instruct the bank or the post office about this option. Depositing funds in the PPF account without providing instructions will result in no interest accumulation on the contributions. Moreover, they will not earn a tax benefit under section 80C of the Income Tax Act. You need to fill form H to extend the PPF account for 5 years with the contribution. You can give this instruction till the lapse of a year from the date of maturity. In absence of maturity instructions, you have to withdraw and close the account, or the bank will extend it for 5 years without any contribution.

At the end of 15 years, unless you had a specific financial goal, you should extend the PPF scheme. The corpus will keep earning interest and stay safe. The power of compounding is the best part of an investment. PPF makes it better because the interest is also tax-free.

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How to Open a PPF Account in a Bank?

Mon, 08 Mar 2021 13:23:20 +0000

The BuyT Desk

If you have been thinking about opening a Public Provident Fund(PPF) in a bank then you must hold an account in that bank. Nowadays banks have made it very easy to follow and track the account. Before we tell you how will you open the account lets understand how does PPF account work.

How PPF works?

A Public Provident Fund(PPF) is a saving cum investment account. It is like a fixed deposit with a lock-in of 15 years. You can make a payment of a minimum of Rs 500 and a maximum of up to Rs 1.5 lakh in a year. You earn interest on your PPF deposit. The interest on PPF is revised every quarter but interest is added on a monthly basis which gives the befit of compounding to the investor. The credited interest gets added to the principal and then interest is earned on the entire amount. At present, PPF is earning interest at 7.10% until March 2021.

Maturity & Tax Benefit of PPF

PPF matures only after 15 years but there are options when the partial withdrawal is allowed. There is the provision of premature closure too. One can close the PPF after 5 years of account opening on the grounds of a medical emergency. The PPF contribution is tax-free and can be claimed as a deduction under section 80C of the Income Tax Act. The amount received at the time of maturity of PPF is also tax-free and even the interest of PPF is tax exempted. The contribution made towards the PPF account of a spouse or a minor is also tax exempted but do keep in mind that you can’t get any exemption beyond the Rs 1.50 lakh limit of section 80C of the Income Tax Act.

Must-Have for opening a PPF account in a bank

PPF account can be opened at post office and banks. If you want to open a PPF account in a bank then this is what you must have.

You can either visit the bank branch or open an online PPF account by using the digital platform of the bank through Netbanking/ or the mobile app of your bank.

Most of the public banks such as State Bank of India & Punjab National Bank have both online and offline service of PPF account. Even the major private banks like ICICI bank, HDFC bank and Axis bank are giving you the facility of PPF account.

You must have a savings bank account with the respective bank and must activate internet banking if you are planning to open your PPF account online.

Your bank account must be linked to your Aadhar number. Your phone number liked to your Aadhar must be active so that you can reeve the authorisation OTP and instantly e-authorise.

You need to physically submit your KYC related document proof along with the filled PPF request form. You will get time to submit these documents.

Documents that should be ready

Identity Proof

PAN details

Aadhar number

Address proof

Passport-sized photograph

Salary slip

Hope we have simplified the steps for you. If you have been looking for along term investment that is safe, saves your tax and gives a return on your investment then PPF could be that answer.

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8 Things you must know about your PPF Account

Tue, 02 Mar 2021 12:19:04 +0000

The BuyT Desk

Public Provident Fund (PPF) is one of the most popular small saving schemes and is considered a good and safe investment. PPF gives you the benefit of compounding interest on your invested capital. Here are 8 things that you must know about your PPF-

1. Interest is fixed but the rate is not fixed

You will get an assured return but the rate of interest on PPF may vary from quarter to quarter. It is revised every 3 months. However, the interest rate or the FY 2019-20 has remained constant at 7.1% all throughout the year. The interest rate of PPF is linked to the 10-year government bond yield. It is decided on the basis of the average bond yield of the last three months. There has been a steady decline in the 10-year bond yield in the last two years. This has had an impact on PPF.

2. PPF can be extended beyond maturity

Public Provident Fund account matures in 15 years. When the account is matured, you have the option to withdraw the entire balance and close the account. But, if you want to increase the contribution, then the account can be extended for a block of 5 years.

3. Pre-mature Withdrawal

A PPF account comes with a maturity of 15 years. But there is provision for pre-mature withdrawal after the completion of 5 years. You can withdraw 50% of the balance of the fourth year or 50% of the balance of the preceding year whichever is lower.

4.Loan against PPF

You can take a personal loan against the balance of your PPF at a nominal interest of 1%. If the account has not completed six years, then you can take a loan from 3 years to 6 years. The loan can be taken up to 25% of the balance till the end of the last financial year. It has to be repaid in 3 years. If the loan is not repaid, the investor cannot take another loan.

5. How much to deposit?

The minimum amount that you must deposit in a PPF account in a year is Rs 500 and the maximum limit is Rs 1.5 lakh. If you do not make a minimum investment of 500 rupees then your account can become dormant. To reactivate the account you will have to pay a penalty of Rs 50.

6. Can I have two PPF account?

Yes, you can open another account in the name of your spouse or minor children. But you can’t invest Rs 1.5 lakh in each of your accounts. The limit of investment in PPF is Rs 1.5 lakh in a year and you can’t cross this threshold. The aggregate of multiple accounts has to be within the limit of Rs1.5 lakh.

7. Why you must make your deposit before the 5th of every month

The Public Provident Fund offers compound interest annually. However, its calculation is done every month. Interest is available on the lowest balance from the 5th to the last date of the month. If you invest before the 5th, then you will get the interest on your deposit for that month but if you deposit post 5th then you may lose the interest on the deposit made post 5th.

8. Tax-free

PPF comes under the exempt-exempt-exempt category. There is an exemption of up to Rs 1.5 lakh under Section 80C on investment in Public Provident Fund. There is no tax on the interest earned and withdrawal at maturity is also tax-free.

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Should PPF account holders worry post-budget?

Mon, 15 Feb 2021 05:15:34 +0000

The BuyT Desk

Will contribution to Public Provident Fund(PPF) be taxed? This question may worry you because the government changed the taxation rules related to employee provident fund(EPF) contribution. As per the new regulations, an employee contributing more than Rs 2.5 lakh in his/her EPF will no longer enjoy tax-free interest income on the exceeded contribution. The interest earned up to 2.5 lakh contribution remains tax-free, but contribution beyond the threshold of 2.5 lakh will be taxed.

What about PPF?

This change will not impact your contribution to PPF account. Because PPF accounts already have a limit fixed on the deposit. As per the PPF act, an individual cannot contribute more than Rs 1.5 lakh annually in a PPF account. Any change in the contribution threshold or its tax liability will need amendment in the PPF act. Till the time this act has not changed the status of PPF remains to be exempt-exempt-exempt. The deposit, interest and withdrawal of PPF will be completely tax-free.

Where can you open a PPF account?

PPF has been one of the most popular tax saving cum investment strategies under section 80C of the income tax act. By investing in a PPF account, one can claim a deduction of up to Rs 1.5 lakh in a financial year. You can open a PPF account in a bank or a post office. PPF ensures a yearly interest from the government, which is compounded annually. At present, the interest for the FY- 2020-21 interest of PPF is 7.1%. This rate gets revised every quarter.

Tenure of PPF

The investment period for PPF is 15 years. After the completion of 15 years, it can be extended to further in a block of 5 years. Partial withdrawal from a PPF account is possible only after completion of 5 years. A PPF account holder can get a loan against their PPF from third to the sixth year from the account opening date.

Let’s understand with an example how your money gives you return in a PPF account. The minimum deposit that you can make in a PPF is Rs 500, and it can go up to Rs 1.5 lakh in a year. If you manage a yearly deposit of Rs 50,000 continuously for 15 years. I am considering the current interest of 7.1% as the rate of return. After 15 years the money deposited by you will be Rs 7,50,000 and the earned interest will be Rs 606,070. Which means the total corpus of Rs 1,356, 070 – you would have earned around 45% of return on your capital.

The plus point of PPF are-

Your capital is safe
Sovereign guarantee of return
Tax-free investment

Due to these reasons, PPF has always been considered a good investment for a long term goal like retirement.

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