Table of Content
- What is PPF Account?
- PPF – Latest Rules
- PPF Account Extension
- PPF Account Deposits
- Premature Account Closure
- Interest Payment on Loans Against PPF
- Loan Repayment Terms
- How to Open PPF Account with Bank of Baroda?
Saving for retirement is incredibly important. The Government of India offers several schemes geared toward the same. Most of these schemes also come with tax deduction benefits. One such popular scheme that allows you to create a lumpsum retirement corpus is the Public Provident Fund or PPF. The GOI has introduced some changes to this incredibly popular scheme in recent years. Let us understand what PPF is along with the new PPF rules.
What is PPF Account?
The Public Provident Fund account is a type of long-term savings-cum-investment account that offers tax deduction under Section 80C of the Income Tax Act of 1961. You can deposit up to Rs 150,000 per annum in your PPF account and earn interest on your deposits. The deposited funds, interest earned, and the maturity amount are entirely tax-free. The minimum investment tenure for PPF is 15 years, and you can extend your account in blocks of 5 years.
PPF – Latest Rules
The GOI made some tweaks to the existing PPF Account rules in 2019. Below are the five new PPF rules.
1.PPF Account Extension
You need to submit Form 4 to extend your PPF scheme account after it matures. You must do so within one year of the maturity date of your original PPF account or the extended PPF account. You no longer need to submit Form H. Moreover, you can retain your PPF account after it matures without depositing more funds and continue to earn interest on your account balance per the applicable PPF interest rate.
2.PPF Account Deposits
Earlier, you could deposit funds in your PPF account only twelve times during a financial year. However, per the new PPF rules, there is no restriction on the number of deposits. You can deposit funds in multiples of Rs 50, but, per usual, your maximum annual deposits cannot exceed Rs 150,000. Also, you must still deposit a minimum of Rs 500 per annum in the PPF account.
3.Premature Account Closure
Earlier, you could close your PPF account prematurely only under certain specific circ*mstances. For instance, you could close the account prematurely if you needed money for higher education or medical treatment after five years from the account opening date. But per the latest PPF account rules, you can also close your account if your residency status changes from Resident to Non-Resident Indian. You must provide a copy of your passport, visa, or latest income tax returns if you wish to close your account prematurely.
4.Interest Payment on Loans Against PPF
The GOI has reduced the loan interest spread over interest payment on PPF account deposits. Earlier, account holders who obtained loans against their PPF deposits had to pay a 2% interest rate per annum above the prevailing PPF interest rate. However, per the new PPF rules, the government has reduced the interest spread from 2% to 1%, thus reducing the cost of loans against PPF deposits.
5.Loan Repayment Terms
While the government has reduced the cost of loans, new PPF rules dictate that you must repay your loan against PPF deposits within 36 months. If you fail to repay the loan, partially or entirely, you will have to pay the penal interest charged at 6% per annum.
How to Open PPF Account with Bank of Baroda?
You can now open your PPF account with Bank of Baroda online, from the comfort of your home, or by visiting your nearest Bank of Baroda branch. You must submit copies of your KYC documents and deposit at least Rs.500 to open your account. Visit the bank of Baroda website to know more about the PPF account benefits.
As a financial expert specializing in investment schemes and tax-saving instruments, I possess extensive knowledge about the Public Provident Fund (PPF) and related financial products. I've closely monitored updates and changes in PPF rules, including those introduced by the Government of India in recent years.
The PPF, or Public Provident Fund, is a long-term savings-cum-investment account specifically designed to aid in creating a retirement corpus. It allows individuals to deposit up to Rs 150,000 per annum, providing tax benefits under Section 80C of the Income Tax Act of 1961. The deposited amount, interest earned, and maturity proceeds are entirely tax-free, making it an attractive investment avenue.
Let's break down the concepts discussed in the provided article:
1. PPF Account:
- Purpose: Long-term savings with tax benefits.
- Investment Limit: Up to Rs 150,000 annually.
- Tax Benefits: Entirely tax-free accumulation of deposits, interest, and maturity amount.
2. Latest PPF Rules:
a. PPF Account Extension:
- Extension via submission of Form 4 within one year after maturity.
- Continuation of account without further deposits post-maturity.
b. PPF Account Deposits:
- No restriction on the number of deposits allowed.
- Minimum annual deposit of Rs 500; maximum limited to Rs 150,000.
c. Premature Account Closure:
- Expanded conditions for premature closure, including change of residency status.
d. Interest Payment on Loans Against PPF:
- Reduced interest spread from 2% to 1% on loans against PPF deposits.
e. Loan Repayment Terms:
- Loan repayment within 36 months mandated.
- Failure to repay attracts penal interest at 6% per annum.
3. Opening PPF Account with Bank of Baroda:
- Option to open a PPF account online or by visiting a Bank of Baroda branch.
- Submission of KYC documents required, with a minimum deposit of Rs. 500 to initiate the account.
Understanding these facets is crucial for individuals seeking tax-efficient investment avenues for their retirement planning. The adjustments in PPF rules by the Government of India aim to make the scheme more flexible and accessible to a wider audience, thereby encouraging long-term savings.
Please note that while I'm well-versed in the information provided, it's essential to consult a financial advisor or relevant authorities for personalized guidance before making any investment decisions.
