Public Provident Fund rules: Here are little-known facts that you must know before investing in PPF

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Updated: October 21, 2019 5:56:32 PM

PPF suits risk-averse investors who are satisfied with moderate but guaranteed returns. Despite its popularity, many investors are not aware of many important facts associated with the PPF account.

PPF, Public Provident Fund, form H, PPF account, PPF interest rates, PPF withdrawal, PPF account online, PPF calculator, lesser known facts about PPF, PPF account transfer, Loan against PPF, PPF rulesThis scheme comes with a maturity period of 15 years and also offers tax deduction under section 80 (C).

Public Provident Fund (PPF) is a savings scheme, one among the nine other small saving investment schemes offered by India Post. Now banks also offer PPF. It can be opted for regular deposits and can be started with a minimal investment amount of Rs 500. This scheme comes with a maturity period of 15 years and also offers tax deduction under section 80 (C). From 01.07.2019, the interest rate offered is 7.9 per cent per annum (compounded yearly).

PPF suits risk-averse investors who are satisfied with moderate but guaranteed returns. Despite its popularity, many investors are not aware of many important facts associated with the PPF account.

Here are some of the little-known facts that you should know before investing in PPF:

Returns on PPF
Currently, PPF offers 7.9 per cent returns, compounded annually. The interest rate is reviewed every financial quarter. Additionally, PPF enjoys Exempt-Exempt-Exempt (EEE) tax status on its returns. This means that the interest earned, along with proceeds gathered on maturity and investments, are tax-exempt under Section 80C.

Liquidity
PPF offers liquidity in the form of partial withdrawals. From the 7th year of opening the account, investors can make 1 withdrawal every year. Additionally, as PPF comes under the EEE category, withdrawals made from the PPF account before the maturity period is also tax exempted.

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Premature closure
Investors should complete at least 5 financial years to be eligible for premature closure. However, only under certain circumstances, premature closure is allowed. For instance, in case of the death of the holder, or if the amount is required for the higher education of the holder or minor account holder, treatment of an ailment or life-threatening disease of the holder, spouse, parent, or children, premature withdrawal can be made. Also, note that premature closure is subject to penalty.

Loan against PPF
From the 3rd financial year up to the 6th financial year, investors can avail a loan against PPF, to the extent of 25 per cent of the amount deposited at the end of the year immediately preceding the year in which the loan is applied. The loan can be replayed either in one lump sum or monthly installments within a period of 3 years.

Extension in a block of 5 years on maturity
At the end of 15 years or on maturity, policyholders get the choice to either close the account or extend it. You can close the account, and withdraw the amount or extend the maturity period in a block of 5 years. The extension of the account can be with or without new deposits. However, if policyholders want to continue their PPF account without any fresh deposits, then they need to inform the branch for such extensions.

By filling up Form H, investors need to inform the branch before the expiry of 1 year from the maturity date to extend their PPF account with fresh deposits.

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