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Important features of Public provident fund (PPF)

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1. The maximum limit on deposit amount in PPF is Rs 1 lakh per financial year. This limit is on total deposit which includes your personal account and your minor child's account in which you are guardian.

2. You cannot open more than one PPF account in your name. But you may open different accounts in the name of your family members. Like in the name of your spouse and your children (Minor/Major).

3. You may also deposit Rs 1 lakh in each of your family members' PPF account. But do remember the point no. 1 mentioned above. Tax saving u/s 80C can be claimed only on the deposit of Rs 1 lakh. If your spouse or major child has some taxable income than you may consider gifting them some money to deposit in their PPF accounts for tax saving or otherwise to earn tax free income. But be sure on the clubbing provisions.

Also do note that if you open 2 accounts for self (one in bank and other in Post office) or you deposit Rs 1 lakh in all accounts (yours and your minor kid's) and get caught than you will be refunded with the extra amount deposited without any interest.

4. Public provident fund account can be extended for any number of times after the expiry of its tenure of 15 years. The extensions will be for the block of 5 years.

5. Interest rate in PPF will be announced every year in April. Unlike earlier, now one cannot predict the future value of the deposits made in PPF every year. Though PPF should be the integral part of one's debt portfolio due to its tax free interest feature, but still from investment planning and asset allocation perspective one should rebalance the allocation every year and understand the other debt investment options along with it. (Read : Debt Mutual funds)

6. Nomination facility is available in PPF and one should use this facility judiciously. Since if nomination is not mentioned in the PPF account, your heirs may have to face many hassles in claiming the amount above Rs 1 lakh lying in PPF account

 

7. PPF has 15 years lockin but you can get a loan and also opt for premature withdrawal after a certain period of time.

Public provident fund or PPF is a very important and must have instrument in one's investment portfolio. But one has to have clarity on its provisions and basic rules so that one can make the optimum use of the instrument to achieve its future life and financial goals.

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