Provident Fund

What Happens If I Miss The PPF Contribution For a Year?

PPF is a popular investment scheme in India. In this article, we will talk about the consequences of Missing PPF Contribution. Read on to know more!

PPF stands for Public Provident Fund. It is a long-term investment option, which can be used to meet any financial requirement in the future. It is an investment option under the National Pension Scheme (NPS) which offers a lot of tax benefits as well. PPF interest rates are fixed every year by the government, and they are usually higher than other savings schemes. In this article, we will discuss what happens on Missing PPF Contribution.

What is PPF Contribution? 

PPF contribution is a type of savings scheme in India, which can be opened by any individual. A PPF account is an investment method that helps you to save your money for the long term. It allows you to deposit money annually up to ₹1.5 lakh and earn interest on it. 

The minimum amount that can be invested annually is ₹500. You need not pay tax on this amount as well as its interest earned, provided the amount remains invested for at least 15 years from the date of opening the PPF account.

Benefits of PPF Contribution 

If you are Missing PPF Contribution, you might be missing some major benefits of PPF. It is a long-term investment option. It has many benefits as mentioned below:

  • Tax Exemption 

Section 80C of the Income Tax Act, 1961 allows the amount invested in PPF to be exempted from tax. The maturity amount received after the tenure is also free from tax. So you can claim tax benefits on your contribution to the PPF account. The maximum amount that can be claimed as a tax deduction in a financial year is ₹1,50,000. After the tenure of 15 years, the maturity amount that you receive is also exempted from tax. This makes PPF a tax-beneficial investment.  

If you want to calculate the tax exemption on your PPF Contribution you can use the PPF calculator by Vakilsearch. Using this tool, you can calculate the tax benefits you will get based on contribution,  tenure, and interest rates.

  • Risk-Free Returns

One of the major concerns of an investor is the risk involved in investment. That’s when PPF comes into play. PPF investment is totally managed by the government and even the returns are managed by government authorities. It is a risk-free investment and has guaranteed returns. The interest rates are fixed by the government which makes PPF a secure investment choice.

  • Partial Withdrawals

The PPF account has a minimum tenure of 15 years. At the end of 15 years, you get the maturity amount based on the amount you invested and the interest rates applicable. However, if you need money before 15 years PPF allows you to take a loan after 2 years of starting a PPF account. The loan can be up to 25% of the investment amount. 

PPF also allows partial withdrawal of money after 7 years of starting the PPF account. The withdrawn funds can be used for multiple purposes including health issues and educational purposes. 

  • Flexible Tenure 

The PPF Account you make matures after 15 years but the government allows an individual to increase the tenure in blocks of 5 years. You can withdraw the matured amount after 15 years or increase the tenure to 20 years and enjoy the benefits of stable interest rates on the invested amount.

  • Small Investment 

Investment is a complicated process and many people are hesitant to invest a large chunk of their earnings easily. PPF helps the majority of people in this case. Being a government-managed invested option makes it more reliable and the minimum investment amount is ₹500. 

These are some major benefits of investing in PPF accounts. Missing PPF Contribution will reduce the interest you receive and might cause other problems which we will discuss in the next section. 

If you want to calculate the maturity amount you will receive after 15 years or increased tenure, you can use the online PPF calculator by Vakilsearch. The calculator shows the maturity amount of the expected investment and it can be very helpful during tax planning. 

Consequences of Missing PPF Contribution 

As you know now, investing in PPF has multiple benefits. Now, it’s time to talk about the consequences of Missing PPF Contribution.

  • Loss of Interest Benefits

The interest you receive in your PPF account annually is based on the amount you receive. So if you do not submit the decided amount in your PPF Account, you will face some losses in the interest amount that you were supposed to receive.  

The reason for not depositing the money can be anything but if your account has less investment, it will automatically get less interest.  This will affect the maturity amount that you will receive after the tenure of the PPF account is complete. 

Learn about PF Calculator.

  • Discontinued Account

As mentioned before in the article, the minimum amount that needs to be invested in the PPF account is ₹500. If an individual fails to deposit this amount at the end of the year, their account will be discontinued.

When a PPF account is discontinued, no more money can be invested in the account. The account holder will get the money they deposited in the past and the interest at the end of 15 years but because no more money can be added to the account, the interest received will be low. In addition to this, a person cannot open a second PPF account.

The discontinued account can be revived within 15 years of the tenure by going to the bank or post office. A small fee of ₹50 is charged and the investment amount for each missed year is supposed to be deposited.

Conclusion 

PPF is one of the most popular investment options in India. It is managed by the government and has stable interest rates. These interest rates are decided by the government and it is a risk-free investment option.  

The amount invested in PPF accounts receives interest and proves to be helpful for the PPF account holder. Missing PPF Contribution has its consequences. In this article, we discussed how it will affect the maturity amount and other things. 

If you wish to know the maturity amount and PPF returns on the investment you made, Vakilsearch can help you. It provides an online PPF calculator that will help you calculate the return easily and help you manage your finances effectively.

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