-- S B Das, Bhopal
I am afraid you have not read me correctly. I had clearly indicated that investments in debt-oriented pure-growth and open-ended schemes are slated to give higher after-tax returns than tax-free interest on PPF. Yes, equity-based schemes are not doing well. To that extent you are right. However, you cannot extrapolate this situation to other schemes of mutual funds. I feel you will do well to have a look at the following schemes presented in alphabetical order) --

i) Alliance Liquid Income; ii) Birla Income; iii) DSP MerrillLynch Bond Fund; iv) ITC Threadneedle High Interest Fund; v) Jardine Fleming India Bond Fund; vi) JM Liquid; vii) Prudential ICICI Income Fund; viii) Reliance Income Fund; and ix) Tata Income Fund; x) UTI Bond Fund.

There is always some argument with the post office and SBI officials regarding withdrawals and maturity payments of PPF accounts. I request you to answer the following questions for the benefit of lakhs of PPF account holders:
1) After the end of which financial year can both make their first withdrawal?
2) 50% withdrawal of which year balance?
3) After which financial year will the accounts mature? i.e. When can they close the accounts?
4) Will the rules differ for accounts opened on 1-4-90 and 31-3-91? In other words, what would be the difference between accounts opened during the same financial year, one on the first day and the other on the last day?

-- Ravi Shankar
The various dates depend upon the financial year and not on the date of its opening. I shall simplifythe rule for you. The first withdrawal can be made during the seventh year after opening the account and each year thereafter. The amount of withdrawal is 50 per cent of the balance to the credit at the end of the preceding fourth or first year, whichever is lower. Even this is complicated. You may apply the following simple method: Suppose the account was opened in FY 1990-91

Maturity: Add 15 to 1991. It matures on 1.4.2006. The entire amount can be withdrawn on 1.4.2006 or any time thereafter, unless you desire to opt for post-maturity continuation. The 20 per cent tax-rebate can be claimed for a lock-in of only one day.

First withdrawal: Add 5 to 1991. Withdrawals eligible from FY 96-97 and every year thereafter. The first withdrawal can be effected on 1.4.1996, irrespective of the actual date of opening the account, whether on 1-4-90 or on 31-3-91. If the right is not exercised before the year-end i.e before 31.3.1997, you lose the right. The amount of withdrawal next year, does not depend on thewithdrawals of the preceding year.

Now, 1997 - 4 = 1993 (FY 1992-93) and 1997 - 1 = 1996 (FY 1995-96)

The amount which can be withdrawn in FY ending on 31.3.1997 is 50 per cent of the balance to the credit as on 31.3.1993 or 31.3.1996, whichever is lower. This being the first withdrawal, you may start wondering as to how the balance to credit on 31.3.1996 will ever be less than the balance as on 31.3.1993.

Such a situation may arise depending upon the amounts of contributions and withdrawals made from year to year.

Loans : Add 2 to 1991. The first loan can be taken in 1991 + 2 = 1993 (FY 92-93) up to 25 per cent of the amount to the credit on 31.3.91. Further loans can be taken provided earlier loans have been repaid in full with an annual interest @1 per cent. Thus, if one takes loan in the 4th or 5th or 6th year, the amount would be 25 per cent of the balance at the end of 2nd or 3rd or 4th year, respectively. Contributions to any of the avenues covered by Section 88 must flow from assessee's incomewhich is chargeable to tax. Only then the rebate can be claimed. This unreasonable requirement creates many problems. For instance, if the contributions are made during the early part of the year, the ITO may scrutinise your account to ascertain that you have actually earned as much as Rs 60,000 during the short period. If the officer finds that there were capital receipts and part of the contribution has been effected out of these proceeds, he may deny proportionate rebate.