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Care to be taken while operating Public Provident Fund (PPF) Account

Keywords : PPF Tax Life Insurance 

Coming to the end of the financial year, there would be rush to visit State Bank Of India (SBI) or Post Office (PO). There would be multiple reasons for this, but the most important is Public Provident Fund (PPF) deposit. Remember to take care of your PPF account. At this time SBI works over time, and the Babu′s do not get much time enjoy their tea or snacks compared to what they are used to in month of April/May.

Today we take the opportunity to explain how to take care of your PPF account. In my next article we shall explain PPF in details on how take maturity and loan. However, there are many pitfalls which should be avoided while investing in a PPF account.

Note: HUF's cannot open a PPF or even a post-office account since May 2005

Care to be taken while operating Public Provident Fund (PPF) Account:

1. Don′t open two PPF accounts in the name of one individual. Even if your current account is inactive, you′re not allowed to open a new PPF a/c. Close the latest account, and get activated the older one as early as possible

2. Don′t deposit more than the maximum allowed. Accountholder is not entitled for interest on any amount deposited in excess of Rs.70,000/- in a financial year in the PPF account.

3. Don′t forget to deposit a minimum amount of Rs 500 every year to avoid the PPF account become inoperative. You will be denied loans / partial withdrawal before maturity.

4. At the time of extension of PPF account, submit Form H, otherwise the continuation will be deemed as ″extension without subscription″ or ″irregular″ and you will be denied interest on additional deposits and also become ineligible to claim section 80C deduction.

5. Don′t forget to nominate(Nomination Form), otherwise your family will have to obtain a succession certificate to receive the PPF proceeds in case of your death.

6. Avoid premature withdrawals and loans unless there is an emergency because PPF is one of the best long term saving instrument available to you.

7. Understand that post-maturity of PPF if you choose ″extension without further deposits″, you can′t change it to ″continuation with further deposits″ after the expiry of one year. So make an informed choice. Also use Form C to withdraw from your PPF account.

8. Don′t recycle the PPF account because it defeats the very purpose of opening a Public Provident Fund account.

9. While making deposits in your PPF account at the end of the financial year for tax savings purpose ensure that you deposit the cheque / demand draft well in time, remember that date of realization is treated as date of deposit. If the cheque/draft is not en cashed by 31st March, the amount will be treated as deposit for the next financial year and you will lose tax benefit for the current financial year. This is as per the amendment made by the Government of India in February 2010 in the Public Provident Fund Scheme. Earlier in case of PPF (unlike other small savings), date of presentation/tender of cheque was treated as date of deposit.

9. After the subscriber′s death, nominee should consider closing the PPF account at the earliest instead of continuing it because a nominee can′t appoint a further nominee. PPF claim form should be submitted.

11. The subscriptions can be deposited in lump sum or in convenient installment of not more than 12 installments.

12. A PPF account where no subscription has been made in a year is treated as discontinued. A subscriber can deposit the minimum subscription of Rs.500/- + default fee of Rs.50/- for each year of default subject to the condition that the total deposit during the year in which defaulted subscription is deposited should not exceed the maximum deposit ceiling of Rs.70,000/- and it is not treated as discontinued.

Lastly but not the least, it is your responsibility to make the decision How Much needs to be deposited? How are you going to maintain? And consult your financial advisor.

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