PPF, or the Public Provident Fund, is a widely used investment scheme. It is supported by the government, which also provides favorable interest rates and tax breaks. But in order to keep your PPF account active and avoid fines, you have to follow certain rules. The helpful advice listed below will help you keep your PPF account free of penalties.
First, you must make a minimum annual contribution of Rs 500 to your PPF account in order to keep the account open and avoid penalties. Your account will be closed if you don’t make this minimum payment, and you will be assessed a fee by the bank when you decide to reactivate it.
The CEO of BankBazaar.com, Adhil Shetty, stated that you can begin investing in PPF with as little as Rs 500. You have to maintain the account open by depositing a minimum of Rs 500 annually. If this isn’t done, the PPF account will be closed and deactivated. You must go to the bank branch where you have the PPF account and pay a penalty of Rs. 50 in order to reactivate the account.
Second, make an investment by the fifth of each month. From the fifth to the last day of the month, the interest on your PPF is computed based on the lowest amount in your account. You will be penalized in a sense if you deposit after the fifth because you will not receive the interest for that month.
Thirdly, keeping the account active is crucial. The PPF plan has a 15-year term, and early termination may result in fines. Though there will be a 1% interest rate reduction, the account may be prematurely closed under certain extraordinary circumstances, provided that at least five years have passed.
Fourth, refrain from borrowing money against your PPF. The ability to borrow against a PPF account is one of its advantages, but it’s important to remember that these loans have interest attached, which could reduce the returns.
Fifth: “PPF deposits are subject to a maximum limit, in addition to a minimum annual deposit. Don’t go over the Rs 1.5 lakh annual cap in a single fiscal year. If this is done, the excess money won’t generate interest or offer any tax advantages, according to Wint Wealth CEO and co-founder Ajinkya Kulkarni.
You should be aware that investing in PPF has many worthwhile benefits. Because of its 15-year lock-in period, it is appropriate for long-term financial objectives like retirement planning, marriage, and the education of one’s children. Putting money into PPF can encourage the practice of consistent saving. Furthermore, under Section 80C of the Income Tax Act, both the principal investment and the interest received under PPF are free from taxes. PPF investments are low-risk and provide guaranteed returns because they are not tied to the market.
It is wise to take action to maintain your PPF if it is an investment that fits with your financial objectives. With all of its advantages, it can help you achieve your long-term objectives and be a valuable addition to your portfolio, according to Shetty.