How inflation can erode your wealth?

"Inflation is one of the biggest threats to your investments. It is like a crack in a water tank. It can erode the value of your money without your knowledge. Current inflation rate in India is 10%. That means the value of your money comes down 10% every year. To beat inflation, one has to invest in an asset which gives more that 10%. Keeping in mind the risk, not keeping all the eggs in one basket, doing proper asset allocation can beat inflation. "

Public Provident Fund

The Public Provident Fund (PPF) Scheme is a statutory scheme of the Indian Government under the provisions of the Public Provident Fund Act, 1968. This scheme was introduced by the central government of India in 1968.


Features of PPF
Where to open a PPF a/c?
Eligibility
What is the minimum and maximum amount one can invest in PPF?
What is the return on this investment or rate of interest?
What is the tax impact?
What is the duration of the PPF a/c?
Is it possible to take a loan on PPF?
Withdrawal of PPF
Can a PPF account be transferred?
Is it possible to open a PPF account in the name of a minor?
Is it possible to do nomination on PPF a/c?
What happens with the discontinued a/c?
Can an NRI open a PPF a/c?
PPF rules in detail


Where to open a PPF a/c?

Any individual can open a PPF account in any nationalised bank or its branches that handle PPF accounts or head post office or certain select post offices.

PPF a/c opening form


Eligibility

Any individuals or individuals on behalf of a minor can open a PPF a/c. Joint account is not permissible.


What is the minimum and maximum amount one can invest in PPF?

The minimum amount to be deposited in this account is Rs. 500 per year. The maximum amount one can deposit every year is Rs. 70,000. Total of 12 deposits can be made in a financial year. After a/c opening passbook will be given with all entries like deposits, loans, withdrawals, repayment etc.


What is the return on this investment or rate of interest?

The money deposited in the PPF account earns interest at a rate fixed by the government periodically. Currently 8.80% per annum ( from 1st April 2012 ) (compounded annually) is credited in the account on 31st March calculated on the minimum balance between 5th day and end of the month.


What is the tax impact?

Deposits completely exempted from wealth tax. Interest is completely tax free under section 80 of IncomeTax Act. Deposits are qualified for Income Tax rebate under section 88 of Income Tax Act. On maturity, you pay absolutely no tax.


What is the duration of the PPF a/c?

The tenure of the PPF a/c is 15 years. The accumulated sum is repayable after 15 years. A subscriber can close the a/c in the 16th financial year. It can be extended for one or more blocks of 5 years


Is it possible to take a loan on PPF?

You can take a loan on the PPF from the third year of opening your account to the sixth year. Loan amount is limited to 25% of the balance. Second loan can be taken after full payment of first loan. Interest is charged at the rate of 1% if prepaid within 36 months and at 6% on the outstanding loan after 36 months.


Withdrawal of PPF

Withdrawal is permissible from seventh financial year from the year of opening, limited to one in a financial year. Amount of withdrawal is limited to 50 % of balance at the end of the fourth preceding year less amount of outstanding loan or 50% of balance at the end of immediate preceding year of withdrawal less amount of outstanding loan, if any whichever is less. If the account extended beyond 15 years; partial withdrawal allowed up to 60% of the balance to the credit at the commencement of the extended period.


Can a PPF account be transferred?

Yes, a PPF account can be transferred from one Head Post Office to another Head Post Office, from Head Post Office to a bank, or vice versa at the request of the subscriber free of charge.


Is it possible to open a PPF account in the name of a minor?

Yes, you can open a PPF account on behalf of a minor child as a guardian or parent(s). No Nomination shall be made in respect of an account opened on behalf of minor.


Is it possible to do nomination on PPF a/c?

Nomination can be made in the name of one or more persons. Nominee can not continue account of the deceased subscriber in his/ her own name. If nomination is not made in case of death of the a/c holder, upto Rs.1 lakh will be given to legal heirs.


What happens with the discontinued a/c?

The account in which deposits are not made for any reasons is treated as discontinued account and such account can not be closed before maturity. The discontinued account can be activated by payment of minimum deposit of Rs.500/- with default fee of Rs.50/- for each defaulted year.


Can an NRI open a PPF a/c?

Non Resident Indians are not eligible to open an account under the Public Provident Fund Scheme, provided that if a resident who subsequently becomes Non Resident Indianduring the currency of the maturity period prescribed under Public ProvidentFund Scheme, may continue to subscribe to the Fund till its maturity on a Non Repatriation Basis.

PPF rules in detail