MONEY9: The government started the PPF scheme in 1968. The purpose behind it is to retire people through small savings (RETIREMENT) Was to save. Yours in PPF Investment (INVESTMENT) Locked for 15 years. Here are six answers to the questions that PPF investors should ask.
1) When does the 15 year term of PPF account expire?
How long will it take you to calculate this 15 year period? Suppose, you opened a PPF account in 2018 and made the first investment on 16th July 2018. So the 15-year lock-in period will be calculated from the end of the financial year in which you opened the account. That is, 2018-19. Thus, calculations for this investment will be made from March 31, 2019 and thus, your PPF expires on April 1, 2034. Remember, PPF always matures on the first day of the new financial year i.e. 1st April. Generally, people calculate maturity from the date PPF is opened. Technically, a PPF account matures in 16 years.
2) If I deposit money in PPF on any date of the month, what difference does it make?
If you plan to invest in PPF every month, you need to deposit money by the 5th of the month. This is because the interest is earned only on the balance on the fifth day of the month. If you have Rs. 20,000 in your PPF on 1st August and you deposited Rs. If you had deposited this amount between 1st and 5th August, you would have got interest on the full amount. So, if you deposit money by the 5th of the month, you will be in profit.
3) Will my money be locked for 15 years?
No, it’s not. PPF features pre-mature partial withdrawal. You can withdraw money from the seventh year after the opening of the account. But cannot withdraw the full amount. You will receive 50% of the amount at the end of 4 years prior to the year you withdraw, or 50% of the total amount of PPF, whichever is less.
For example, suppose you open a PPF account in January 2012 and withdraw money from PPF for your child’s education in 2021. So four years before 2021, that is, 50 per cent of the balance at the end of the financial year 2018 or 50 per cent of the balance at the end of March 2021, whichever is less, you can withdraw as much money. You can withdraw money only once a year. This amount will be considered tax-free and will not incur any penalty.
4) Can I get a loan on PPF?
You can take a loan after completing two years of opening a PPF account and before completing five years. You will get a loan of 25% of the total amount deposited in your PPF account. If you take a loan on PPF, you will have to pay the principal of the loan first and then pay the interest. The principal can be repaid in installments, but the loan must be repaid within 36 months i.e. 3 years from the date of taking the loan.
You will get a loan at 2% more interest than the interest you will get in PPF. Interest will have to be paid in two monthly installments or higher. If you do not repay the loan within the stipulated time, the money will be deducted from your PPF account. The loan will have to pay 6% more interest than the current PPF interest. If the investor dies, his nominee or heir will have to pay interest on the loan.
5) Does the account have to be closed after maturity of 15 years?
When your PPF account matures, you will have 3 options – closing the account and withdrawing money, continuing the account without making a new investment and continuing the account by investing more. You can only extend the account for another five years. That is, after 15 years you can extend the account for another 5 years and earn interest. Whether you invest or not, but after 15 years, you need to inform the financial institution what you want to do now, whether you want to withdraw money or keep the account open, it is necessary to inform.
6) Can PPF account be closed before maturity?
The account holder may close the PPF account before maturity in certain circumstances. You can close the account only after five years of opening it. The PPF account can be closed if the account holder wants money for the treatment of a serious illness of his / her parent, spouse or dependent child or for higher education of the child. But closing the account will be a loss because the interest you get will be deducted one per cent.
Money Nine’s advice
- An investment like PPF is suitable for those who want to raise a large fund by raising a small amount.
- PPF gives you the habit of investing regularly.
- As the scheme is government-owned, there is less risk on the amount invested in it, but there is no guarantee of interest rate hike.
- Interest in PPF is reviewed every 3 months.