The Public Provident Fund is the darling of all tax saving
investments.No wonder! You invest in it and you get a deduction on your
income. Besides, the interest you earn on it is tax-free. Since it is a
scheme run by the Government of India, it is also totally safe. You can
be sure no one is going to run away with your money. Here, we summarise
the scheme, tell you how to open a PPF account and what to expect.
Thus, in order to remove inconsistency between PPF and other small savings schemes and to bring in uniformity in the reckoning of the date of deposit of all the schemes, the government has issued necessary instructions through the circular to banks / other intermediaries which hold PPF accounts for the individuals to treat the date of realisation of the cheque or demand draft by the subscriber as the date of deposit.
This issue becomes particularly relevant in respect of deposits made towards the end of the financial year by cheque / demand draft because if the same is not realised by March 31, then the same will be treated as deposits for the following financial year. This would also have ramifications in respect of the tax deduction being claimed by the individuals in a particular tax year.
8. Opening an account for a minor :-There have been certain practical hurdles in respect of opening of accounts for minor vis-à-vis some intermediary agencies. This clarification reiterates that as per the rules under PPF scheme, an individual may on his own behalf or on behalf of a minor of whom he is a guardian, open a PPF account. Further, either father or mother can open PPF account on behalf of his / her minor child, but both cannot open the account for same child.
9. What are the differences and similarities between the National Savings Certificate (NSC) and PPF?
Do consider opening a PPF account if you do not have one. You can put in as little as Rs 500 a year to keep it going.
1 .
To open a PPF account, drop by a State Bank of India branch. SBI’s
subsidiary banks can also open accounts. Alist of these subsidiary
banks is available on the bank’s Web site.You can even visit the
nationalised bank in your neighbourhood. Selected branches of
nationalised banks can also open accounts.The head post office or
selection grade sub-post offices also open PPF accounts.
2. You
will have to fill up a form. You can take a look or download
the form from SBI’s web site. Along with the form, attach a photograph
and submit your Permanent Account Number. If you do not have a PAN, then
furnish an attested copy of either your ration card, voter’s identity
card or passport. When you open an account, you will be given a passbook
(just like a bank pass book) in which all subscriptions, interest
accrued, withdrawals and loans are recorded.
3. You
can have only one PPF account in your name. If, at any point, it is
detected that you have two accounts, the second account you have opened
will be closed, and you will be refunded only the principal amount, not
the interest.
4. You
cannot open a joint account with another individual. The account can
only be opened in one person’s name. You are free to nominate one or
more individuals. On the death of the account holder, nominees cannot
keep the account going by making contributions. If there are no
nominees, the legal heirs get the money. You can open one account for
yourself and others for your child/ children. But, on your death, your
children cannot make any additional contributions.
5.
The minimum amount to be deposited in this account is Rs 500 per year.
The maximum amount you can deposit every year is Rs 70,000. The interest
you will earn is 8% per annum.
Let’s
say you open an account for your minor child. You can deposit Rs 70,000
in your account and Rs 70,000 in your child’s account. In this case you
can in my opinion take the maximum benefit of Rs. 1,00,000/- U/s. 80C.
As Limit of Maximum Investment in a year of 70000/- is fixed by Public
provident Fund Act not by Income Tax law.
You can make up to 12 deposits in one year. You don’t have to put in this money at one go.
6. The
PPF account is valid for 15 years. The entire balance can be withdrawn
on maturity, that is, after 15 years of the close of the financial year
in which you opened the account. So, if you opened it in FY 2006-07
(this financial year), you will be able to withdraw it 15 years later,
starting March 31, 2007 (end of this financial year). That means your
PPF matures on April 1, 2022. It can be extended for a period of five
years after that. During these five years, you earn the rate of interest
and can also make fresh deposits. Once your account expires, you can
open a new one. The only limitation is that you cannot withdraw it until
seven years are completed, after which 50% of your deposits can be
withdrawn, if needed.
7. Deposit date in Cheque payments :-Till
recently, in case of a PPF when a subscriber used to make deposits by
local cheque or demand draft, the date of tender of cheque or draft at
the accounting office was treated as the date of deposit of PPF,
provided the said cheque was duly honoured on presentation for
encashment. 
In
contrast, in case of other small savings schemes like Post Office
Savings Scheme (POSS), Senior Citizen Savings Scheme 2004 (SCSS) any
money deposited in these accounts by means of a cheque, the date of
encashment of the cheque is treated as the date of deposit.Thus, in order to remove inconsistency between PPF and other small savings schemes and to bring in uniformity in the reckoning of the date of deposit of all the schemes, the government has issued necessary instructions through the circular to banks / other intermediaries which hold PPF accounts for the individuals to treat the date of realisation of the cheque or demand draft by the subscriber as the date of deposit.
This issue becomes particularly relevant in respect of deposits made towards the end of the financial year by cheque / demand draft because if the same is not realised by March 31, then the same will be treated as deposits for the following financial year. This would also have ramifications in respect of the tax deduction being claimed by the individuals in a particular tax year.
8. Opening an account for a minor :-There have been certain practical hurdles in respect of opening of accounts for minor vis-à-vis some intermediary agencies. This clarification reiterates that as per the rules under PPF scheme, an individual may on his own behalf or on behalf of a minor of whom he is a guardian, open a PPF account. Further, either father or mother can open PPF account on behalf of his / her minor child, but both cannot open the account for same child.
9. What are the differences and similarities between the National Savings Certificate (NSC) and PPF?
| National Savings Certificate (NSC) | Public Provident Fund (PPF) |
| Interest Paid: 8%, compounded half-yearly | Interest Paid: 8%, compounded annually |
| No monthly/yearly payments | No monthly/yearly payments |
| Minimum investment: Rs 100 Maximum investment: No Limit | Minimum investment: Rs 500 (required annually) Maximum investment: Rs 70,000 |
| Duration of investment: 6 years | Duration of investment: 15 years |
| Can be used as a security for mortgage and other purposes | Cannot be used for such purposes |
| Tax benefit under Section 80 ‘C’ available. Maximum limit: Rs 100,000 | Tax benefit under Section 80 ‘C’ available. Maximum limit: Rs 70,000 (limit of the investment in PPF) |
| Good medium-term investment option | Good long-term investment option |
| Interest if fully Taxable | Interest is fully Exempt |
Do consider opening a PPF account if you do not have one. You can put in as little as Rs 500 a year to keep it going.