• Know about PPF Rules

    The Public Provident Fund Scheme, which was launched by the Central Government, operates on a set of rules and regulations. There are rules for every process, as listed in this article.

    Rules and regulations of the Public Provident Fund account:

    1. The scheme is for 15 years.
    2. The PPF interest rate is set by the Ministry of Finance, every year. Presently (April 2014 – March 2015), it is 8.7%, compounded annually.
    3. Minimum Deposit amount: Rs.500 per annum.
    4. Maximum Deposit amount: Rs.1,50,000 per annum.
    5. Minimum deposit is mandatory every financial year.
    6. Up to 12 instalments are allowed per year.
    7. Deposits can also be made in a lump sum.
    8. Dormant accounts (which have no deposits made) are considered as “discontinued accounts” and these cannot be closed before maturity.
    9. “Discontinued accounts” can be re-activated upon the payment of the minimum deposit amount plus a default fee of Rs.50for each year that no deposit has been made.
    10. Accounts for minors can be opened by their parents or legal guardians.
    11. Deposits in minor accounts are clubbed with deposits in the accounts of the parent / guardian, the total of which cannot exceed Rs.1,50,000.
    12. No age limit for opening PPF account.
    13. Joint accounts cannot be operated.
    14. Deposits are exempt from wealth tax.
    15. Interest of deposits are tax free.
    16. Deposits in the PPF account qualify for rebates under Section 80C of the Income Tax Act, 1961.
    17. PPF account can only be created and operated through Post Offices and Nationalized Banks through authorized branches.
    18. Account can be transferred between banks.
    19. Account can be transferred between bank branches of the same bank.
    20. A PPF account can be opened by those who contribute to CPF / PF / GPF Fund.
    21. Deposits shall be in multiples of Rs.100, subject to a maximum of Rs.500.
    22. Loans can be availed against PPF accounts from the 4th to 6th year of deposits. The max loan amount is 25% of the total amount deposited as at the end of the last financial year.
    23. Loans are repayable in 36 months.
    24. Lock-in period of 15 years applies, and the corpus can only be completely withdrawn on maturity.
    25. Premature withdrawals can be made from the end of the 6th financial year.
    26. Maximum premature withdrawal amount is either:
      • 50% of the total amount that existed in the PPF account at the end of the 4th year before the year in which the amount is withdrawn, or
      • The end of the preceding year, whichever is lower
    27. Death is the only acceptable reason that can be given in order to close the PPF account or withdraw from it before maturity.
    28. PPF account holders can extend the tenure of the account in 5 year blocks.
    29. Interest on the balance in the PPF account after maturity will be earned on a normal rate as admissible on a PPF account, until the account is closed.
    30. One withdrawal is allowed every year in accounts held for over 15 years, which is subjected to a maximum of 60% of the balance at the end of the 15 year term.

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