Want to know about the minimum lock-in period for a PPF account? You will get all the information right here.
In 1968, India established the Public Provident Fund (PPF) to encourage people to save a small portion of their income and invest it in return. It’s an investment vehicle that helps you save money on taxes every year while you put away money for your retirement. The PPF is a good choice for anyone looking to save money on taxes and earn a steady return on their money. In this article you’ll see what is the minimum lock-in period for PPF account.
PPF Account – Brief Explanation
The Public Provident Fund (PPF) scheme is a long-term investment plan with a high rate of interest and returns. Under this plan, participants can get a tax break on their annual contributions to a PPF account by claiming it as a deduction on their Form 1040, Schedule A, Section 80C. Financial gains such as interest and dividends are exempt from taxation under the Income Tax Act.
Value of PPF Accounts
- When it comes to investing, a PPF account is an excellent choice for those who prefer to take on little danger.
- The PPF is not market-linked and is backed by the government. As a result, it protects many people’s investment needs by providing guaranteed returns.
- Due to the predictability of PPF account returns, investors use them to spread their money around. In addition, there are tax advantages to using them.
How Much Is the PPF Interest Rate?
- Interest payment occurs annually on March 31, and the Ministry of Finance determines the rate. The interest rate is based on the monthly average of the balances from the fifth day of the month through the last day of the month.
- In addition, you can use our PPF calculator to determine the potential earnings from a PPF investment.
The Characteristics of PPF
- Tenure: The PPF has a minimum 15-year term, and you can add five years at any time.
- Investment Limits: You can put as little as Rs 500 into your PPF each year, up to a maximum of Rs 1.5 lakh. Any amount, up to a maximum of $12 monthly, can be invested.
- Opening Balance: The minimum required to open an account is Rs 100. Any amount invested more than Rs 1.5 lakh will not accrue interest or qualify for tax relief.
- Deposit Frequency: The PPF account must have a minimum of one annual deposit for 15 years.
- Mode of deposit: Cash, checks, demand draughts (DDs), and electronic fund transfers (EFTs) can all be used to add money to a PPF account.
- Nomination: A PPF account holder may name a nominee at the time of account opening or at a later date.
- Joint accounts: In the case of the PPF, only one person’s name can appear on the account at any given time. Joint account applications will not be processed.
- Risk Factor: The Indian government backs PPF, so investors’ principles are safe and assured a minimum rate of return. The risk associated with maintaining a PPF account is low.
Who Can Participate in the PPF?
- Everyone who meets the eligibility requirements can open a PPF account.
- Unless the second account is in the name of a minor, only one PPF account is permitted per citizen.
- Accounts can’t be opened for the PPF by HUFs or non-resident Indians. If they already have a PPF account in their name, it will remain active until its termination date. However, these accounts cannot be extended for five years, as in the case of Indian citizens.
Borrowing versus PPF
- Between the ages of three and six, you are eligible to take out a loan against your PPF account. The longest possible loan term is three years (36 months).
- The maximum loan amount is 25% of the total funds.
- If the first loan is paid in full by the sixth year, you will be eligible for a second loan.
Withdrawal from a Personal Retirement Account
Once a PPF account has reached maturity, after 15 years have passed, the entire balance can be withdrawn. After 15 years, account holders have full access to their principal and interest in their PPF accounts and can close them at any time. However, the scheme allows partial withdrawals beginning in year 7, i.e., after six years, should account holders need the money before the 15-year term is up. After the fourth year, you can take out up to half of your savings early without incurring any penalties (preceding the year in which the amount is withdrawn or at the end of the prior year, whichever is lower). Plus, withdrawals are limited to once per calendar year.
Lock-in Period of a PPF Account
The money in a PPF account must be spent within 15 years, or it will be lost. It is important to remember that the lock-in period for PPF accounts does not begin on the account opening date. Instead, it is determined by the calendar year-end of the first deposit date. It means you can’t take money out of your PPF account until 15 years have passed since the end of the fiscal year in which you made your first deposit. The month and day on which you set up your account are irrelevant. Let’s say you opened a PPF account and deposited your first contribution on July 26, 2019. The 15-year lock-in period, in this case, will begin on the last day of the fiscal year 2019-2020 (March 31, 2020). As a result, you won’t be able to access your funds before April 1, 2035, when your account matures.
Conclusion: Minimum Lock-in Period for a PPF Account
The Public Provident Fund (PPF) is a great way to build a long-term nest egg and earn guaranteed returns without paying taxes in India. A PPF account can be opened with as little as ₹100 per year. In addition, you shouldn’t put away more than ₹1.5 lakh in a single year, as any sums invested over that limit won’t accrue interest. Hope this blog regarding minimum lock-up period for a PPF account is helpful. To know intricate details about PPF accounts, you need to get in touch with the experts such as Vakilsearch who have years of experience in the same.
Also, Read;
- Know About Online PPF Calculator
- How Is Interest Calculated On PPF
- Close A PPF Account In A Post Office
