#FinancialBytes: Major changes to PPF rules you should know about
The Public Provident Fund (PPF) is one of the most-preferred long-term tax-saving investment options. Many people invest in PPF as it offers decent returns along with income tax benefits. However, the Department of Posts of the Ministry of Communications has recently introduced some changes to procedural rules of the PPF scheme. Here are the key changes made to PPF rules to know about.
Changes in the rules related to PPF contributions
The government introduced a few changes to PPF contribution rules. While the minimum and maximum contribution amounts remain unchanged, the minimum required amount for opening PPF accounts and the number of deposit contributions have changed. Earlier, subscribers could make only 12 deposits in a year. But now, they can make any number of deposits in multiples of Rs. 50 not less than Rs. 500.
Interest rate on loan taken against PPF balance changed
Accountholders can take a loan on their PPF balance between the 3rd and 6th financial years of opening the account. The interest rate charged on loan taken against the PPF balance has been reduced from 2% to 1% now. However, subscribers must repay their loan within 36 months; if they fail to repay, a penal interest of 6% per annum will be charged.
New rules for premature closure of PPF account
Also, PPF accountholders are now allowed to close their account prematurely under two circumstances, but not before five years of opening it. It is permitted either when there is a change in the subscriber's residency status (upon producing copies of passport and visa or income-tax return), or for financing higher education of the accountholder's dependent children (after producing offer letters from recognized Indian/abroad universities).
PPF account retention rules after maturity with deposits
PPF accountholders can also extend/retain their accounts after the 15-year maturity period with deposits within one year of the date of maturity. For extension of the PPF account, subscribers should submit an application with Form-4; earlier, they were required to submit Form-H. Meanwhile, the form required to be submitted for opening a PPF account has now been changed from Form-A to Form-1.
#5: Rules for PPF account extension without deposits
Also, subscribers can retain their PPF account after maturity without further deposits and continue earning interest on the balance as per rates notified from time to time. In cases where PPF accounts are retained without deposits, accountholders can make only one withdrawal every financial year.