Compounding works best over the long term and hence PPF, a 15-year debt investment, goes a long way in accumulating a tax-free corpus for your future goals.
The Public Provident Fund (PPF) is one of the most popular fixed-income investments in the country. The popularity is mainly because PPF offers a sovereign guarantee on the principal and interest earned, returns are tax-free and additionally, the investment made in PPF qualifies for tax benefit Section 80C. It is known that compounding works best over the long term and hence PPF, a 15-year debt investment goes a long way in accumulating a tax-free corpus for your future goals.
Even though the rules governing the PPF are well-defined by the Government, however, the lack of proper management of the online infrastructure, as well as the post office branches especially in the past, could have lead to certain irregularities. Experts suggest PPF account holders should ensure that their accounts do not become irregular till its maturity, till 15 years.
Irregularity may arise in various ways. For instance, if a PPF account holder ends up holding more than one PPF account in their own name, problems may arise. For an individual, only one PPF account is allowed to be opened in one’s name. However, there are chances that one ends up holding multiple PPF accounts in one’s name. It could also include holding one account in the post office and one in the bank.
Opening of a PPF account
A declaration from the account holder needs to be made while opening the PPF account that no other PPF account is being held by the individual.
However, it is also allowed that the same individual can open another account in the name of a minor. In the case of two children, both the parents cannot open in the name of one child. One parent can open in one minor child’s name while the other parent can open in the second child’s name.
Treatment of the second account
If you find out you have more than one account in your own name, you need to get rid of one of the accounts. If the second account is not regularised, it will become an irregular account. The account holder for the second account will also not get any interest on the balance lying in the second account. Hence, the account needs to be regularised. Note that, as per the rules a PPF account has to run till its maturity, closing the second account is also not possible.
The way out
The account holder with two accounts needs to amalgamate both the accounts, to avoid loss on interest on the irregular account which is the second account. To do this, the account holder needs to approach the Department of Economic Affairs (DEA) of the Ministry of Finance. He/she needs to write to the Under Secretary-NS Branch MOF (DEA).
This writing to the DEA should disclose all the details of the two accounts and can be routed through the post office. After amalgamation, if the total contributions during the year cross the maximum limit of Rs 1,50,000, without interest the excess amount will be refunded to the account holder.
Other than reviving the account by paying the penalty, the account holder does not have any other option. The penalty needs to be paid for each unpaid year, the minimum of arrear contributions for unpaid years along with the current year’s minimum subscription.