CitiTribe

Public Provident Fund (PPF)

Features

Investment in PPF can be made by opening PPF account in any designated post offices or designated commercial banks. Need not have any account with the bank
PPF pass book is issued to the account holder, which is updated from time to time
More than one account per person is not allowed
Tenure is 15 years from the end of the financial year (i.e. April to March) in which the account is opened
Interest paid annually
Can be made in multiple of Rs 5 either in lump sum or in installments, not exceeding 12 installments per year
Deposit should not be less than Rs 500 or more than Rs 70000 per year
If a subscriber fails to deposit minimum of Rs 500 in a given financial year (April to March), the account is considered discontinued but the interest will continue to accrue, can be condoned subsequently by payment of certain fees
In case of death, the nominee connot continue the account
Account can be transferred from one bank to another and bank to post office or vice a versa

Advantages/Disadvantages

Safety : Very safe investment. The balance amount not subjected to any attachment order or decree of court
Liquidity: Loan can be taken against the balance in the account. Withdrawal is permissible to certain extent every year after 7^th year. Loan facility available from 3^rd financial year
Capital Appreciation: No capital appreciation, your principal amount deposited will remain same
Returns : Preset interest rate 8% compounded annually. Rate of interest not fixed for entire duration of the investment but announced regularly
Tax benefits: Deposits qualify for deduction from the taxable income just like PF Interest income is tax free for income tax. Not liable for wealth tax

Live Examples

You deposit total of Rs 10,000 in the year 2008-09 (April-March), in number of installments
You earn interest of 8% per annum which will be credit to your account at the end of the financial year. However, your actual interest may not be 8% on Rs 10000 as the interest is calculated on the basis of lowest balance between 5^th to end of every month in the year. Let us say you earn interest of Rs 500. So your balance become Rs 10500 (Rs 10000 Principal/capital + Rs 500 interest) at the beginning of the next year.
Next year the rate of interest which is 8% may or may not be the same, depends on revision of govt if any
The process is repeated every year till completion of 15 years from the end of 2008-09, so you can withdraw the entire amount only on April 1, 2024, on which you don’t have to pay any tax
You can take loan against the balance to certain extent, in 2012-13
You can make withdrawal to certain extent, in 2015-16
ou may use PPF investment calculator for detail

Documents and other requirements

Problems and Solutions

Death without nominee- In the event of the death of the subscriber, the amount standing to his credit can be repaid to his nominee or legal heir as the case may be, even before the completion of 15 years.
Not able to deposit minimum amount in a year- If deposits are not made in PPF account in any financial year, the account is treated as discontinued. The discontinued account can be activated by payment of minimum deposit of Rs 500 with default fee of Rs 50 for each defaulted year.
Transfer of account- For transfer of account, necessary application is required to be made in the branch where account has been opened.

Complaints

1^st recourse - For any grievances you can lodge complaints with the branch of bank/post office where you have opened account.
2^nd recourse - In case of banks, in case your complaints are not responded by banks, you can lodge complaints with RBI Banking Ombudsman (just like deficiency in any banking services). For accounts in post office, you can write to Post Master General.