Public Provident Fund or PPF account, a retirement planning-focused instrument, is offered by various institutions such as commercial lenders State Bank of India (SBI). The PPF scheme, which was introduced by the National Savings Organization in 1968 to mobilize small savings, offers an investment avenue with decent returns coupled with income tax benefits, according to SBI's website- sbi.co.in. Individuals in their own name as well as on behalf of a minor can open the account at any branch. As per extant instructions, opening of PPF accounts in the name of Hindu Undivided Family is not permitted, according to SBI. (Also read: Top Five Banks Offer These Interest Rates On Fixed Deposit)
Given below are key things to know about SBI public provident fund (PPF) scheme:
A minimum of Rs 500 subject to a maximum of Rs 1,50,000 per annum can be deposited in a PPF account. Any excess amount , if deposited, neither earns any interest nor is eligible for rebate under Income Tax Act. The amount can be deposited in lump sum or in a maximum of 12 installments per year.
The original duration of PPF account is 15 years. Thereafter, on application by the subscriber, it can be extended for 1 or more blocks of 5 years each, according to the SBI website.
Interest rate is determined by central government on quarterly basis. At present it is 7.9 per cent per annum. Interest is calculated on the minimum balance (in PPF account) between fifth day and end of the month and is paid on March 31 every year, according to SBI.
Income tax benefits
Income Tax benefits are available under Section 88 of the Income Tax Act. Interest income is totally exempt from Income Tax. Amount outstanding to the credit is fully exempted from Wealth Tax also.
Premature payment is allowed only after the account holder has completed five financial years, where 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. Also, the amount can be prematurely withdrawn for higher education of the account holder or the minor account holder, on production of documents and fee bills in confirmation of admission in a recognized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 and abroad.