PPF ACCOUNT



Your Public Provident Fund (PPF) account can continue living even beyond its specified 15-year tenor. The tenor of the account can be extended every five years ad infinitum even after the man- datory 15-year period is over.

WHAT IS A PPF?

A PPF is a 15-year debt instrument that works somewhat like a sys- tematic investment plan. Every year you need to make deposits in your account. Your deposits could range anywhere between Rs500 and Rs70,000. You can deposit up to 12 times a year. PPF currently pays an interest of 8% per annum, which is a guaranteed rate by the government of India.

PPF is arguably the best investment vehicle as it offers a risk- and tax-free 8% return. Not only do you earn tax-free returns, but you can also save on your taxes while investing. PPF investments are also allowed for deduction under section 80C.

WHO IS ELIGIBLE TO OPEN A PPF ACCOUNT?

If you are an Indian national or fall into the Hindu undivided family category, you can open a PPF account. You can oper- ate your account from abroad if you opened it while in India, but if you are a non-resident Indian, you can't open a PPF account. You can open your PPF account in any post office or designated branches of na- tionalized banks.

HOW CAN YOU EXTEND THE TENOR?

At the end of the 15th year, you can simply ask your bank or post office branch, where you opened your account, for an extension. In this extended pe- riod, you can continue to make a minimum contribution of Rs500, but it is not mandatory on you.

Even during this period, you will continue to earn 8% as interest.

When you extend your PPF, you get locked-in for the five-year period. However, partial withdrawals are available--60% of the to- tal balance at the beginning of the extension can be withdrawn as a lump sum. Alternatively, the withdrawal sum can be spread over five years.

SHOULD YOU EXTEND?

Though you continue to earn the same rate of interest, remember that this 8% is not a rate that is guaranteed for life. Periodically, the Central government declares a rate that gets applicable on fresh investments. Before you go for any extension, check what rate the PPF is fetching you. If it tides over inflationary pressure, it is still a good instrument to invest.