Public Provident Fund, popularly referred to as PPF, is an excellent way to start saving money because PPF accounts are tax-free. As a systematic saving investment, it encourages individuals to set aside some money every month towards savings for the future.
Even Though PPF accounts are popular but not many people know about PPF accounts banks benefits for investors. Here are 10 must-known facts that investors need to make note of in order to maximize their benefits.
What is the Minimum Amount Required to Open PPF Accounts?
The minimum amount to start a PPF account is Rs 100 that can be opened by salaried employees, self-employed individuals, and other individuals. PPF accounts online banks can be opened at any SBI or affiliated banks like Bank of Baroda or Central Bank of India.
Another option available to investors must know about PPF accounts that it can be opened at the post office. Additionally, in case of a minor, an individual can open an account on their behalf by the guardian.
What is the Maturity Period of PPF Account?
Also, what most people don’t know about PPF accounts banks mature after 15 years and hence are an excellent way to systematically invest in this plan which is tax-free as well.
What are the Minimum and Maximum Deposit Limit for PPF Accounts?
The minimum deposit limit for PPF accounts banks are Rs 500 to make over the course of a year and the maximum amount is 1 lakh in one financial year.
Deposits can be made in one go or installments in multiples of Rs 10. However, only 12 installments can be made each fiscal year.
Failure to deposit the minimum balance will lead to the PPF accounts banks being discontinued. However, note that the interest will accrue and once the payments are regularized and the prescribed default fee is paid, the account can be operated as usual.
How is Interest Calculated for PPF Accounts?
It is important that investors are aware of PPF accounts interest calculation method. This way, they will be able to calculate the interest and take a call on how much to save each month.
The first important point to note about PPF accounts banks is that the interest is based on the lowest balance between 5th of the month and the last day of the month. To maximize savings deposits should be made between 1st and 5th each month.
Note that the PPF interest amount is compounded annually and it is credited on 31st March every year.
What happens if Premature Withdrawals are made from PPF Accounts?
In the case of premature withdrawals are allowed from the 7th year onwards and it cannot exceed 50 percent of the balance amount at the end of the 4th year. However, the account can be closed prematurely permanently in case of death.
What is the Tax Benefits Extended by PPF Accounts Banks?
The tax benefits extended by PPF account back are as follows:
- Qualify for deductions under Section 80C
- The entire amount of maturity is tax-free
- Deposits exempted from wealth tax
Whatis the Terms You Should Know about PPF Accounts Regarding Loans?
Another question that most people are unaware of PPF accounts is that a loan can be taken against PPF accounts banks but under certain conditions. The terms under which a loan can be taken are as follows:
- The loan can be availed between 3rd and 6th year
- Maximum of 25 percent balance must be maintained at the end of 2nd year
- The interest rate charged on the loan will be more than 2 percent of the PPF interest rate at that time
- Withdrawals must be repaired in a period of 24 months
Being aware of these terms and conditions about PPF accounts will help give respite to investors.
Can a Second Loan be taken on PPF Accounts Banks?
Something about PPF accounts that people need to know about is that a second loan can be taken up by investors between the 3rd and 6th year only if the previous loan has been prepaid in full. Once the account holders become eligible for withdrawals they will no longer be eligible for taking up loans.
Can the PPF Accounts Banks Subscription Period be Extended?
Another aspect that most people are unaware ofPPF accounts subscription period. After the 15 year period, account holders have an option to extend the period by 5 years.
However, it should be noted that the same rate of interest will be levied on the account. In case, despite the extension, regular contributions are not made then the withdrawals will be restricted and allowed only once a year.
Can NRIs Open PPF Accounts?
Another question that people have about PPF accounts is whether NRIs can open PPF accounts banks. No, NRIs are not eligible to open PPF accounts banks.
In cases where an account holder settles abroad then existing accounts are allowed and can contribute to it till the maturity period.
The pros outweigh the cons when talking about PPF accounts. Hence, as a systematic investment plan, it presents several advantages that investors should take up and capitalize on by deriving the maximum benefit extended.