Monday, 8 April 2013

INVESTMENT IN PPF


INVESTMENT IN PPF



Only an individual resident to India can open PPF account this facility is not available to NRI’s , also not available to HUF and AOP’s.There are multiple reasons why we invest in PPF but here I am listing down some  reasons which make it a good investment and an option which creates wealth. This is the only account which is free from court attachment. We also can invest on the name of minor and when the minor becomes major he or she might have a good fortune without any liability or fear of attachments.
PPF account opening process is very simple and hassle-free. Investor can subscribe to scheme through Post Office or through banks appointed by Government. To open a PPF account, investor has to visit any of the banks/Post Office and submit account opening form and other documents. Some banks also offers online opening of accounts.
  Interest rate applicable from April 1st 2013 is 8.7% earlier it was 8.8%.
-          Can open with minimum of Rs.500 rebate available u/s 80C of maximum Rs. 1, 00,000 P.A.
-          Ideal Investment for both salaried and business class.
-          Loan facility available from 3rd financial year up to 5th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% p.a. However, the rate of interest of 1% p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2011.
-          Free from Court attachment,
-          Interest credited is tax free as well as returns are compounded annually. Deposits are exempt from wealth tax.               
-          The account in which deposits are not made for any reason is treated as discontinued, account and such an account cannot be closed before maturity. The discontinued account can be activated by payment of the minimum deposit of Rs.500/- with default fee of Rs.50/- for each defaulted year
-          Flexible deposit amounts and no fee charged
-          One deposit with a minimum amount of Rs.500/- is mandatory in each financial year.The deposit can be in lump-sum or in convenient installments, not more than 12 installments in a year or two installments in a month, subject to total deposit of Rs.70,000/-.It is not necessary to make a deposit in every month of the year. The amount of deposit can be varied to suit the convenience of the account holders
-          A Power of Attorney holder can neither open nor operate a PPF account. The grandfather/mother cannot open a PPF on behalf of his/her minor grandson/daughter. The deposits shall be in multiples of Rs.5/- subject to minimum of Rs.500/-.The deposit in a minor account is clubbed with the deposit of the account of the guardian for the limit of Rs.1,00,000/-
-          No age is prescribed for opening a PPF account.
-          The facility of first withdrawal in the 7th year of the account subject, to a limit of 50% of the amount at credit preceding three year balance. Thereafter one withdrawal in every year is permissible.
-          Premature closure of a PPF Account is not permissible except in case of death. Nominee/legal heir of PPF Account holder on death of the account holder cannot continue the account. The account has to be closed in such case
-          The account holder has an option to extend the PPF account for any period in a block of 5 years at each time. The account holder can retain the account after maturity for any period without making any further deposits. The balance in the account will continue to earn interest at normal rate as admissible till the account is closed. One withdrawal in each financial year is also admissible in such account.
-          The Account is transferable from one Post Office to another and from Post Office to Bank or from a Bank to a Post office. Account is transferable from one Bank to another bank as well as within the bank to any branch.
-          Nomination facility available.

Types of form’s used

-          Form-A : Account opening form.
-          Form-B : PPF Challan
-          Form-C : Application for withdrawal
-          Form-D : Application for loan
-          Form-E : Nomination
-          Form-F : Cancellation or variation of nomination
-          Form-G : Application for withdrawal by nominee / legal heirs. 
If an individual wants to change nominees name he needs to fill form F and E.

Summary

Public Provident Fund scheme has been introduced for salaried as well as for self employed people to encourage savings habit and provide tax benefits. As compared to other small savings schemes introduced by government and by non- government institutions, Public Provident Fund scheme stands out in terms of benefits offered. This is because investment in PPF scheme falls under triple E regimen i.e. Principal, Interest and outflow all are tax exempted. The balance in the PPF account cannot be attached by any order or decree of court in respect of any debt or liability incurred by the subscriber.
Investor can invest as minimum as Rs. 500 to maximum Rs. 1,00,000 in the PPF account in one complete financial year in one lump sum subscription or in maximum 12 transactions. Tenure of PPF scheme is 15 years and premature closure of account is not allowed. After 15 years investor can completely withdraw the accumulated balance (Principal + Interest) and close the account or if investor desires to extend his PPF account, extension can be taken in a block period of 5 years for any number of times. As per PPF scheme terms and conditions prescribed by Government, an investor can avail of loan and withdrawal facility.


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