Public Provident Fund or PPF investment is considered as one of the best tax-saving options due to its benefits in every steps – the investment amount is eligible for tax deductions under section 80C of the Income Tax Act, the interest earned is also tax free and so is the maturity amount. However, the awareness level is low on how many PPF accounts a person can open and how much may be invested in a financial year.
Sunil (name changed) belongs to an orthodox family where not only ‘risky’ equity investments, but even credit cards are a strict “No, No”. So, he opened PPF accounts, which are considered very safe due to government backing, for himself, his homemaker wife and hid daughter, and every year would put Rs 1,50,000 in each of the accounts. When informed about the limits of PPF accounts and investments, he confronted, saying the representative of the private bank, in which he opened the accounts, never objected.
Whatever may have been the motive of the bank representative to mislead him, but investors should know the rules relating to the Public Provident Fund before opening accounts.
The government has put some restrictions on PPF, because apart from the sovereign guarantee, the investors also enjoy higher interest rates and benefits like tax deductions u/s 80C and tax-free maturity.
First of all, both husband and wife may open PPF accounts in their name only if both of them have their own sources of income. So, a working husband cannot open a PPF account in the name of his wife. However, he may open account(s) for his kid(s), but total investments in a financial year should not cross the statutory limit, which is equivalent to the 80C limit and currently is Rs 1,50,000. In case a woman is working, she may open PPF accounts for herself and her kid(s), but not in the name of her husband.
Hence, a PAN card holder cannot open more than one account in his name, be in the same or different bank(s) or Post Office(s). He or she may open accounts for his/her minor children, but total investments in PPF against a single PAN cannot exceed the statutory limit, which is now Rs 1,50,000 in a financial year.
If a PAN card holder invests more than Rs 1,50,000 in a financial year, as per the PPF guidelines, he or she will not get any interest on the excess investment and will be allowed to withdraw the amount any time.
So, facing the risk of losing interest on excess PPF investments, Sunil, after the birth of his second daughter, shifted his focus on Sukanya Samridhhi Yojana, and started investing Rs 1,50,000 each in two SSY accounts of his daughters.