The Public Provident Fund (PPF) offers a set rate of return, which is currently 7.1% and is announced every quarter. The Income Tax Act's Section 80C exempts up to Rs 1.5 lakh of PPF investments annually from taxation. The annual interest as well as the maturity amount are both tax-free.
The account holder must deposit a minimum of Rs. 500 each fiscal year into the account, which has a 15-year validity period.
What happens when account becomes inoperative
Every financial year, Rs 500 must be deposited as the minimum amount into their PPF account. The account gets inactive if you don't comply with that.
Although an inactive account will continue to earn interest until it matures in accordance with the rules, there are also disadvantages to such accounts. If the account is inoperative, you can no longer claim loans against your PPF account, which could be troublesome if you foresee requiring money soon.
How to revive an inactive PPF account?
According to the Axis Bank website, here is the process revive an inactive PPF account
- You have to send a written request to your bank or the post office branch where you have the PPF account.
- Once that is done, you have to deposit Rs 500 for every year that the account has been inactive, plus Rs 500 for the current financial year.
- You also have to pay a penalty of Rs 50 for every lapsed year. These deposits have to be made at the bank or the post office branch along with the application.
- After the application and cheque deposit is complete, the bank or post office branch will review your records. If the lock-in period of 15 years is complete the account can’t be reactivated.
Disadvantages of inactive PPF account
If a medical emergency arises, for example, or if you need to pay for your children's school, build or purchase a house, etc., you can withdraw money from the PPF account. Obtaining a loan secured by your PPF account is another option. But only active accounts with a deposit made at least once per year are eligible for these services.
Interest calculation
Interest is computed on the minimum amount (in PPF Account) between the fifth and last day of the month and is paid on March 31st of each year.
Interest income is totally exempt from Income Tax. Amount outstanding to the credit is fully exempted from Wealth Tax also.
(Your legal guide on estate planning, inheritance, will and more.)
Download The Economic Times News App to get Daily Market Updates & Live Business News.
