PPF account holders must deposit their FY24 contribution today, April 5, in order to get the maximum yearly return from the scheme. This is because the PPF interest rate is calculated based on the minimum balance between the fifth day of the month and the last day of the month. So, it is important to ensure the funds are credited into the PPF account by April 5.
For example, if your PPF account balance is Rs 2 lakh and you want to make a further contribution of Rs 1.5 lakh at one go, the extra amount if invested after April 5 will lose out on some interest returns.
If the additional contribution of Rs 1.5 lakh is invested before April 5, your new PPF account balance will be Rs 3.5 lakh (Rs 2 lakh earlier and Rs 1.5 lakh invested now). According to the PPF rules, the monthly interest on the corpus will be calculated on the whole Rs 3.5 lakh, which is around Rs 2,070. However, if the additional amount of Rs 1.5 lakh is invested after April 5, it will not be taken into account for calculated the interest for the April month.
About PPF
The PPF, which is part of small savings schemes, currently offers an interest rate of 7.1 per cent per annum. The rate is reviewed on a quarterly basis. In the latest review last week, interest rates were kept unchanged at 7.1 per cent for the April-June 2023 quarter. An investor can invest as low as Rs 500 and up to a maximum of Rs 1,50,000 per annum under the scheme.
The scheme has an original duration of 15 years. Thereafter, on application by the subscriber, it can be extended for one or more blocks of five years each. Loans and withdrawals are also permitted depending upon the age of the account and balances as on the specified dates. Income tax benefits can also be availed for investing under the scheme. It is a risk-free investment as the PPF is supported by the central government.
Withdrawal On Maturity
PPF account matures after a period of 15 years. On maturity, the entire corpus can be withdrawn. One can open a PPF account with a bank branch or post office. At the time of withdrawal, Form C is filled and submitted with the entity where the PPF account is opened — bank or post office. Thereafter, the PPF account is closed and the invested amount with returns is credit to the bank account.
Partial Withdrawal
Partial withdrawal is allowed after the completion of at least six years of the PPF account. In this case, only 50 per cent of the corpus is allowed to be withdrawn. The rest of the corpus remains in the PPF account. Partial withdrawals from PPF can be made from the 6th financial year after the account is opened. On partial withdrawals of the PPF account, no tax is levied. And, only one partial withdrawal is allowed per financial year. For this also, Form C is submitted at the bank or post office wherever the PPF account is opened.
Premature Closure
Premature closure is allowed under certain conditions and only after at least five years of the PPF account are complete. Under this, the full corpus can be withdrawn on the grounds of education and health. The specific conditions include life-threatening ailments or serious diseases faced by account holders, spouses or children; and children’s or account holder’s higher education.
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