Public provident fund (PPF) accounts offer attractive interest rates along with decent returns that are fully exempt from income tax. One can start depositing in PPF accounts with as low as Rs. 500 and as much as Rs. 1,50,000 per annum. PPF accounts mature within 15 years. PPF accounts are equipped with facilities like loans, premature withdrawals and extension. Banks and post offices offer the option of PPF accounts. The largest lender of the country, State Bank of India (SBI), also offers the option of PPF accounts.
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Here are 10 things you must know if you are applying for PPF accounts of SBI (according to its website, bank.sbi.com)
1. Individuals in their own name as well as on behalf of a minor can open the account at any SBI branch. As per extant instructions, opening of PPF accounts in the name of Hindu Undivided Family is not permitted.
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2. The original duration of PPF accounts is 15 years. Thereafter, on application by the subscriber, it can be extended for 1 or more blocks of 5 years each.
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3. A minimum of Rs.500.00 subject to a maximum of Rs.1,50,000 per annum may be deposited in PPF accounts. The subscriber should not deposit more than Rs.1,50,000 per annum as the excess amount will neither earn any interest nor will it be eligible for rebate under Income Tax Act.
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4. The interest rate on PPF accounts is determined by the government on a quarterly basis. At present it is 7.6 per cent per annum with effect from 01.01.2018. Interest is calculated on the minimum balance ( in PPF Account) between 5th day and end of the month and is paid on 31st March every year.
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5. Loans and withdrawals are permitted from PPF accounts depending upon the age of the account and balances as on the specified dates.
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6. Income Tax benefits are available under Sec 88 of IT Act. Interest income is totally exempt from Income Tax. Amount outstanding to the credit is fully exempted from Wealth Tax also.
7. A nomination facility is available in the name of one or more persons. The shares of nominees may also be defined by the PPF subscriber.
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8. Premature payment is allowed only after the account or the account of the minor account holder of whom he/she is the guardian has completed five financial years, where: a) The amount is required for the treatment of serious ailments or life threatening diseases of the account holder, spouse or dependent children or parents, on production of supporting documents from competent medical authority; b) That the amount is required for higher education of the account holder or the minor account holder, on production of documents and fee bills in confirmation of admission in a recognized institute of higher education in India & abroad.
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9. The PPF account can be transferred to other branches/ other banks or post offices and vice versa upon request by the subscriber. The service is free of charge.
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10. Non-resident Indians can continue to hold PPF accounts.