Public Provident Fund (PPF) is one of the most attractive investment options especially for tax-saving purpose as it not only provides higher interest rates, but apart from giving 80C tax benefits on deposits, interest and maturity values are also tax-free. The sovereign guarantee and immunity against attachment under court decree order make the fund even more attractive.
However, an individual may open only one PPF account for himself/herself and/or a account each for his/her minor children and may deposit only up to the maximum investment limit of Rs 1,50,000 by adding balance in all accounts in a financial year, while the minimum amount to be deposited to keep the accounts active is Rs 500.
While no interest will be paid on excess amount if more than Rs 1,50,000 is deposited in a financial year, you may lose several benefits as a consequence of not depositing the minimum amount of Rs 500.
Consequences of failure to deposit minimum amount
You may open a PPF account with a minimum deposit of Rs 100, but if you fail to deposit the remaining Rs 400 before the end of the financial year in which you opened the account, the subscription you paid will be returned without interest with the remarks that the amount of subscription being less than the minimum limit prescribed, the PPF account in question cannot be treated as having been opened validly.
In case you paid the minimum amount of Rs 500 in the first year, but failed to deposit the same in subsequent years, your account will be treated as discontinued.
Loss of benefits
If your PPF account becomes discontinued, you will not be able to deposit further subscriptions.
You will not be entitled to the facility of obtaining a loan or making partial withdrawals unless the account is revived.
Moreover, you cannot open another PPF account in addition to the discontinued one.
However, you will get the amount deposited back, but only after the expiry of the maturity period of 15 years, along with interest, which will continue to be added each year on the balance at the rate fixed from time to time.
But you will not be able to extend the account after the maturity period, unless the account was revived within the subscription period of 15 years.
How to revive a discontinued account
To revive the discontinued account, you may approach the bank or Post Office, where you have opened the account for condonation of the default, on payment, for each year of default, a fee of Rs 50 along with the arrears subscription of Rs 500 for each year.
But remember that a discontinued account can be revived during the 15-year period of maturity only. It cannot be revived after maturity nor can it be closed before maturity.