Public Provident Fund (PPF) is a tax-free investment (EEE), which means that the amount invested, the returns accumulated, and the amount withdrawn is exempt from tax. This makes PPF a very attractive investment vehicle for your retirement corpus. Recently, the Indian Government has replaced PPF Scheme 1968 by PPF Scheme 2019. Whether you already invest in PPF or you are planning to invest, it is important for you to understand these changes and how it could affect your financial goals.
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Withdrawal
With the new rule, PPF account holders will be able to withdraw 50% of their fourth-year end balance. Earlier, a PPF account holder would able to withdraw 25% of the accumulated amount after seven years.
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Deposit
Until now, an individual could make a maximum of 12 deposits to the PPF Account. Now, there is no limit on the number of deposits. Deposits can be made in the multiples of Rs.50/- up to a maximum of Rs.1.5 Lakhs (in a financial year).
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Premature closure
Premature closure of the account will be allowed after completion of five financial years from the end of the year in which the account was opened. Earlier, premature closure was allowed in case of serious ailments of self or dependents, higher education of self or minor account holder. In addition to these, as per the new rules, premature closure will also be allowed if there is a change in residency status of the account holder. The account holder must provide a copy of passport and visa or income tax return in case of a change in residency status.
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Interest rate on loan
PPF loan interest has been reduced to 1% P.A. from 2% P.A. This rate will be added over and above the prevailing PPF interest rate. That is, currently the interest rate of PPF investments in at 7.9%, and hence the interest rate applicable on loan will at 7.9%+1%, which is 8.9% P.A. You are eligible to take a loan from PPF account from the third financial year, but this facility is available only till the end of the sixth financial year. The loan amount is capped at a maximum of 25% of the balance available at the close of two years immediately preceding the year in which the loan is being applied for.
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Change in Forms
There has been a complete change in the forms used for various proposes. The new forms are as below-
Form 1: Opening of Account form
Form 2: Form for application for loan/withdrawal
From 3: Form for application for closure of the account
Form 4: Application for extension of account
Form 5: Form for premature closure of the account
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