As a Investor you have a good understanding and know about various financial investment strategies.That can help you save money and build wealth. One of the most popular investment methods in India is the Public Provident Fund (PPF). PPF is a government scheme that gives a variety of benefits such as Tax benefits, Fixed return, and flexible investment. In this article we discuss the rules and regulation, withdrawal rule, deposit rule, closure rule, maturity rule,oversea investment rule and Rule of 72.
Table of Contents
- What is PPF ?
- PPF Withdrawal Rules
- PPF partial withdrawal Rules
- PPF Deposit Rules
- PPF closure rules
- PPF Maturity Rules
- Overseas Investment Rules
- PPF Extension Rules
- Rules of 72
What is PPF ?
PPF stands for Public Provident Fund, which is offered by the Government. PPF is a long term investment opinion in India to help individuals save money for their retirement. It was launched in 1968, and is tax free investment with any Indian citizen can open a PPF account with a minimum deposit of Rs 500. You can open a PPF account in a post office or bank. The maximum investment allowed Rs 1.5Lakh in a Year.
PPF Withdrawal Rules
PPF has a lock period of 15 Years. Which means you can’t withdraw the amount before maturity year. But you can do partial withdrawal from 7th year onward. You can withdraw a maximum 50% of your balance at the end of the 4th preceding year or 50% withdraw at the end of the preceding financial year, which is lower. The interest on withdrawal amount will be charged 1%.
PPF partial withdrawal Rules
As i mentioned earlier you can do partial withdrawal from 7th year onwards. The maximum balance you can withdraw is 50% of the end of the 4th preceding year. You can make a partial withdrawal only once in a year.
PPF Deposit Rules
There is a minimum amount to open a PPF. That’s only Rs 500, and the maximum amount you can deposit is Rs 1.5lakh in a year. The deposit can be one time if you can deposit as an instalment like Rs500, minimum instalment amount Rs500. The deposit can be made by cash, cheque or demand draft.
PPF closure rules
PPF accounts can be closed after completion of 15 years from the date of opening. If the account holder needs the amount urgently they can close that account after 5 years. In case an account holder dies, their nominee closes that account and claims the amount.
PPF Maturity Rules
The mature period of a PPF account is 15 Years. After maturity you can withdraw the entire amount with an interest amount. After maturity if account holders want to continue they need to submit a form within one year of maturity.
Overseas Investment Rules
NRIs or Non Resident Indians are not eligible to open a PPF account. If an Indian citizen becomes an NRI during the period of PPF account, they can continue that account until maturity. The investment in the account will be governed by the rule applicable to NRIs.
PPF Extension Rules
After the maturity of a PPF account, if account holders want to continue that account they need to submit a form to continue within one year of maturity. The extension can be 5 years and the account holder can deposit at that period.
Rules of 72
The rule of 72 is a simple mathematical formula. That will help you double your investment within a period of time. Rule of 72 applies to PPF, you need to divide 72 by your annual rate of interest offered by PPF to know the exact number of years your investment will double.
Example : If the interest rate of PPF is 7% then divide 72 by 7, and you will get the exact year which year your investment will be doubled.
PPF is a great investment option for the long term to those who want to save money for the long term and enjoy free tax benefit and fixed return. We are also discussing all rules related to PPF, from account opening rule to withdrawal rule, mature rule. And also we discussed rule 72.
No, an individual can open only one PPF account.
No, the interest earned on PPF is tax free.
Yes, you can increase and decrease the amount of your PPf account.
Yes, you can transfer your PPF account from one bank to another one.
No, you can’t withdraw the full amount from your PPF account before maturity. You can withdraw partially.