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PPF Alert! Five recent rules changes you should know

PPF Alert: There is a sharp cut in an interest rate in Public provident fund(PPF), for this quarter, along with those on other small saving schemes. For ease to the citizen, the government also recently extended the date for making an investment in PPF for claiming an income tax deduction for 2019-20.

The PPF scheme has a maturity of 15 years. Last fiscal, the government had also tweaked a few rules for the benefit of PPF account holders. These were mostly procedural in nature

5 things, which every-one should know about the new PPF rules:

1) After an 80-basis-point cut in an interest rate for the April-June quarter, PPF still fetches a 7.1% interest rate. PPF remains an attractive option for long term savings when the interest rates on bank deposits are falling sharply. For example, the highest interest rate offered by SBI across all tenure of FDs is 5.7%.

2) Due to the 21-day lockdown, the government has extended the date for making various investments and payments for claiming an income tax deduction for 2019-20 to June 30. This includes Section 80C (which also includes investment in PPF), 80D (health insurance) and 80G (donations). Hence the investment/payment can be made up to 30.06.2020 for claiming the deduction under these sections for FY 2019-20.

3) There would be no penalty on non-deposit of mandated minimum deposit in PPF account for the year 2019-20, Public provident fund(PPF) account holder can make the deposit till June 30 with no penalty/revival fee, same guidelines are applicable for other small savings schemes.

4) According to changes made in the previous fiscal, now an account holder can make deposits in multiples of INR 50 any number of times in a financial year, with a maximum of a combined deposit of INR 1.5 lakh a year. Earlier, a maximum of 12 deposits was permitted in a period of one year into a PPF account. The government had reduced the interest rate charged on loan taken against PPF balance to 1% above the prevailing PPF rate from 2% earlier.

5) If a PPF account holder fails to deposit a minimum of INR 500 in any financial year, the account is treated as discontinued. It can be revived on payment of a fee of INR 50 along with arrears of minimum deposit of five hundred rupees for each year of default. And for this deposit made till June 30, March 31, 2020, will be considered for the purpose of calculating interest or payment of interest.

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