8 important PPF Rules every investor must know

This post carries some highlights on the basic PPF rules and important features of PPF (Public provident fund). Though I have already covered details on PPF in my earlier article, still looking at the comments section I found that many things are still not clear to the investors. (Read: All you wanted to know about PPF).

So the idea of writing this post is to stress on the important ppf rules which you want to understand. But if you want to understand PPF in detail, you have to visit the previous article only.

PPF is among one of the best investment options in India. Where it offers tax-free interest, it is also eligible for saving u/s 80C of Income tax act. It is a very important instrument to be used in an asset allocation for long-term investment.

PPF Rules – Some important basic features of the Public provident fund (PPF):

• The maximum limit on deposit amount in PPF is Rs 1.50 lakh per financial year. This limit is on total deposit which includes your personal account and your minor child’s account in which you are a guardian.

• You cannot open more than one PPF account in your name. But you may open different accounts in the name of your family members. Like in the name of your spouse and your children (Minor/Major).

• You may also deposit Rs 1.50 lakh in each of your family members’ PPF account. But do remember the point no. 1 mentioned above. Tax saving u/s 80C can be claimed only on the deposit of Rs 1.50 lakh. If your spouse or major child has some taxable income than you may consider gifting them some money to deposit in their PPF accounts for tax saving or otherwise to earn tax-free income. But be sure to the  Income-tax clubbing provisions. (Also Read: Gift tax rules to save Income tax)

Also , do note that if you open 2 accounts for self (one in the bank and other in Post office) or you deposit Rs 1.50 lakh in all accounts (yours and your minor kid’s) and get caught then you will be refunded the extra amount deposited without any interest.

• Public provident fund account can be extended for any number of times after the expiry of its tenure of 15 years.  The extensions will be for the block of 5 years.

• The interest rate in PPF will be announced every quarter along with other small saving scheme Interest rates. Unlike earlier, now one cannot predict the future value of the deposits made in PPF every year. Though PPF should be an integral part of one’s debt portfolio due to its tax-free interest feature, still from investment planning and asset allocation perspective one should re-balance the allocation every year and understand the other debt investment options along with it.

• Nomination facility is available in PPF and one should use this facility judiciously. Since if the nomination is not mentioned in the PPF account, your heirs may have to face many hassles in claiming the amount above Rs 1 lakh lying in PPF account. (Read: Importance of Nomination).

• PPF has 15 years lockin but you can get a loan and also opt for premature withdrawal after a certain period of time. 

• NRIs are not allowed to open PPF accounts. And as per the notification isued in October 2017, if they have one PPF account while being in resident status, then the PPF account will stand closed form the day they turned into NRI

Public provident fund or PPF is a very important and must have instrument in one’s investment portfolio. But one has to have clarity on its provisions and basic ppf rules so that one can make the optimum use of the instrument to achieve its future life and financial goals.