In the past we have written articles about the benefits of choosing to invest in Provident Fund (PF) and the timely changes that the government brings about. The government has yet again introduced certain changes to how one may operate the PF account. Read on to find out.
1. Change in PPF Contribution Rule
While the minimum and maximum amount to be deposited into the PPF account remains unchanged, the minimum amount required to open a PPF account has been changed. Also, the number of times an amount can be deposited into the PPF account has also been altered.
Earlier one could make a maximum of 12 deposits within a period of one year. However, now an account holder can make deposits in multiples of Rs 50 any number of times in a one-year period. In this manner, a maximum of Rs 1.5 lakhs can be deposited into the PPF account.
2. PPF Loan Interest Rate
If you are a PPF account holder you can apply for a loan between the third to sixth financial year of opening the account. In a further boost, the interest charged on the loan taken from the PPF account has been revised from two per cent to one per cent.
The loan that you avail has to be repaid within 36 months and the interest amount has to be repaid in not more than two monthly installments post the repayment of principal. In case there is a delay in repayment, and the same is not done within the stipulated 36 month period, then the interest on the outstanding loan will be charged at six percent.
Note: Only the interest rate payable on the loan taken has been changed. Everything else remains the same. Also, remember that in case a loan is taken then the account does not earn any interest until the repayment of the loan is done in full.
3. Premature Closure of PPF Account
There are two reasons on the basis of which your PPF account can be closed prematurely, but not before five years of its operation:
a) Change in residency status of the account holder on production of copy of passport and visa or income tax return.
b) Finance higher education of the dependent children of the account holder and this can be done upon the presentation of the offer letter from a recognised university in India or abroad.
Note: Remember, that the premature closure is at a cost of one percent reduction in the rate at which interest is credited to the account. Also, this change is in addition to the existing rules of withdrawal.
4. Can One Continue PPF Account without Making any Further Contribution after Maturity?
According to the new rules, a PPF account can be continued even after the maturity date without making any further deposits. As per the old rules, there was no clarity on what one could do post maturity date.
The new rules have clearly specified that the individual can continue to hold the PPF account post maturity without making any contributions. What one must note here is that once the PPF account is continued without deposits for more than a year post maturity, then the account holder cannot make deposits in the subsequent years. The account will continue until the time it is closed and earn interest as per the rates.
(Edited by Saiqua Sultan)