Public Provident Fund
From Indiapensions
ricaceltr
Legislation
The Central Government, by notification in the Official Gazette has established the PPF under Section 3 of Public Provident Fund Act, 1968 for the general public especially unorganised sector who are unable to enjoy the benefits like other salaried employees.
Operational Framework of the Scheme
Subscription to the Fund
Any individual can subscribe to this fund either on his behalf or
- on behalf of a minor of whom he is a guardian or
- on behalf of a Hindu Undivided Family
- on behalf of an association of persons or a body of individuals consisting in either case, only of husband and wife governed by the system of community or property in force in the State of Goa and the Union Territories of Dadra and Nagar Haveli and Daman and Diu.
Non Resident Indians are not eligible to open an account under the Public Provident Fund. However, if a resident who subsequently becomes Non Resident Indian during the currency of the maturity period prescribed under Public Provident Fund Scheme, may continue to subscribe to the Fund till its maturity on a Non Repatriation Basis. An individual who is already subscribed to General Provident Fund / Employees Provident Fund is also qualified to open the PPF account. However, no individual can open two PPF accounts in his name at the same time. If there are two accounts of same individual then second account will be treated as irregular account and will carry no interest unless both the accounts are amalgamated. The amalgamation is done with the approval of the Ministry of Finance. Also, two adults are debarred to open a joint PPF account. An account can be opened only by a single individual, though there can be more than one nominee.
Term of PPF Account
The term for which the PPF account is maintained is fifteen years. The paragraph 9(3A) of PPF Scheme, 1968 provides for continuance of the account on the expiry of 15 years for a block period of 5 years and so on. In case of the extension of the account, an individual needs to exercise an option within one year after the expiry of fifteen years. He also needs to inform the bank or post office where he holds his account.If an individual does not exercise the option for continuance of the account or does not inform the post office or bank then his investment will continue to earn interest and one would not get any tax benefits under Section 88 of Income-tax Act.
Contribution
During a financial year, an individual can contribute a minimum of Rs.500 and a maximum of Rs.70,000. If contributions in excess of Rs.70,000 are made during a year by the subscriber, the excess amount would be treated as irregular and would neither carry any tax rebate nor any interest. The Public Provident Fund has a upper limit of Rs.70,000 annually. This is in accordance with the Section 88 of the Income Tax Act which allows tax rebate from the amount of tax payable in respect of sums paid or deposited towards contribution to provident fund, etc. up to a specified limit of Rs. 70,000 per year. He can subscribe to any amount that is within the prescribed limit and is in the integral multiple of Rs.5. Where a subscriber to a PPF account does not subscribe Rs.500 in the initial year, the subscription paid by him will be returned to him without interest. This is done with the remarks that the amount of subscription is less than the minimum limit prescribed and hence treated as invalid. The subscription can be deposited in lump sum or in convenient installments. In case one wants to put the money in installments, then maximum of twelve installments per year can be deposited. The PPF account is flexible in the sense that one need not deposit the same amount every month. However, if the subscriber does not deposit the amount within the prescribed limit (between Rs 500 - 70,000 per year) in any particular year (s) then the subscriber's account would be treated as irregular and would neither earn any rate of interest nor would enjoy any tax rebate in that particular year(s).
Opening of a PPF account
An individual can open a PPF account at any branch of the State Bank of India, its associated banks or in a few other designated nationalised banks. PPF account can also be opened at the designated post offices or a General Post Office. Wherever the PPF account is opened, the subscriber is given a passbook where the details of the subscriptions, interest accrued, withdrawals, loans and repayment together with interest due are recorded. The total number of accounts opened at India Posts are as follows
| Years | Total Number of Accounts |
|---|---|
| 1983 - 1984 | 21273 |
| 1984 - 1985 | 25657 |
| 1985 - 1986 | 26410 |
| 1986 - 1987 | 29542 |
| 1987 - 1988 | 41993 |
| 1988 - 1989 | 64039 |
| 1989 - 1990 | 122780 |
| 1990 - 1991 | 231759 |
| 1991 - 1992 | 384569 |
| 1992 - 1993 | 332539 |
| 1993 - 1994 | 450128 |
| 1994 - 1995 | 550667 |
| 1995 - 1996 | 661942 |
| 1996 - 1997 | 795639 |
| 1997 - 1998 | 924341 |
| 1998 - 1999 | 1048504 |
| 1999 - 2000 | 1206224 |
| 2000 - 2001 | 1407652 |
| 2001 -2002 | 1549217 |
| 2002 - 2003 | 1709227 |
| 2003 - 2004 | 1730008 |
For the services rendered by the banks and post offices, they receive a commission from the Ministry of Finance. The rate of commission is calculated on a per account basis. This rate varies from time to time. The given table illustrates the rate of commission as given to India Post that varied from time to time. This is as follows:
| Years | Rate of Commission |
|---|---|
| 1993 - 1994 | 45.35 |
| 1994 - 1995 | 49.89 |
| 1995 - 1996 | 54.88 |
| 1996 - 1997 | 60.37 |
| 1997 - 1998 | 66.41 |
| 1998 - 1999 | 73.05 |
| 1999 - 2000 | 80.36 |
| 2000 - 2001 | 88.4 |
| 2001 -2002 | 97.24 |
| 2002 - 2003 | 100.26 |
| 2003 - 2004 | 102.63 |
Wherever the PPF account is opened, the subscriber is given a passbook where the details of the subscriptions, interest accrued, withdrawals, loans and repayment together with interest due are recorded.
The subscriber can deposit his subscription with the Account office with challan in Form B. The counterfoils of the challans are returned to the depositor by the Account Office. Every subscription is made in cash or by crossed cheque or draft or pay order in favour of the Accounts Office.
| States | 2001 - 2002 | 2002 - 2003 | 2003 - 2004 |
|---|---|---|---|
| Andhra Pradesh | 47800 | 454419 | 61114 |
| Assam | 71248 | 81792 | 25664 |
| Bihar | 44483 | 48435 | 52865 |
| Delhi | 148178 | 157819 | 168398 |
| Gujarat | 148887 | 158770 | 164175 |
| Haryana | 48799 | 52762 | 65827 |
| Himachal Pradesh | 6366 | 6934 | 7692 |
| Jammu & Kashmir | 5247 | 5872 | 7692 |
| Karnataka | 37487 | 39177 | 41137 |
| Kerala | 15662 | 18186 | 20511 |
| Maharashtra | 210910 | 254802 | 296358 |
| Madhya Pradesh | 28548 | 39800 | 30764 |
| North East Region | 9031 | 9761 | 9761 |
| Orissa | 5768 | 6404 | 7474 |
| Punjab | 164193 | 174020 | 178360 |
| Rajasthan | 144167 | 154201 | 165178 |
| Tamil Nadu | 173701 | 182537 | 189120 |
| Uttar Pradesh | 104859 | 110699 | 116610 |
| West Bengal | 112598 | 117299 | 94177 |
| Chattisgarh | 0 | 0 | -9616 |
| Jharkhand | 0 | 0 | 0 |
| Uttaranchal | 8831 | 11468 | 13397 |
Investment Pattern by the Government
The government has no provision for professional investment of the annual accretions into this scheme. A corpus of assets (securities) is not visible. Instead, a part of the annual accretions into PPF are used for paying out the corresponding year's withdrawals from the scheme. Besides, 100% of the net annual accretions (i.e.,net collections) are distributed among the State Governments at 9.5% interest while the balance accretions are diverted to the Public Account of the Government.
| Years | Opening Balance(In Crores) | Receipts (In Crores) | Closing Balance (In Crores) |
|---|---|---|---|
| 1990 - 1991 | 102.29 | 90.21 | 190.29 |
| 1991 - 1992 | 190.29 | 114.26 | 300.91 |
| 1992 - 1993 | 300.91 | 170.98 | 465.98 |
| 1993 - 1994 | 465.98 | 242.34 | 698.05 |
| 1994 - 1995 | 698.05 | 352.15 | 1027.27 |
| 1995 - 1996 | 1027.27 | 413.38 | 1402.91 |
| 1996 - 1997 | 1402.91 | 503.49 | 1847.33 |
| 1997 - 1998 | 1847.33 | 644.59 | 2416 |
| 1998 - 1999 | 2416 | 1015.71 | 3338.02 |
| 1999 - 2000 | 3338.02 | 1405.04 | 4623.06 |
| 2000 - 2001 | 4623.06 | 1928.46 | 6392.45 |
| 2001 - 2002 | 6392.45 | 1942.82 | 8110.93 |
| 2002 - 2003 | 8110.93 | 2336.65 | 10155.33 |
| 2003 - 2004 | 10155.33 | 2526.85 | 12265.72 |
Interest Rate
The balance in the Fund earns interest at the rate as notified by the Central Government in the official gazette from time to time. Interest is allowed for calendar month on the lowest balance at credit of an account between the close of the fifth day and the end of the month. This is then credited to the account at the end of each financial year. The present rate of interest is eight percent per year since 1st March, 2003.
Withdrawals
The subscriber is allowed to make one withdrawal during a year. The first withdrawal is made at any time after the expiry of five years from the end of the year in which the initial subscription was made. The maximum amount that can be withdrawn from the account is fifty percent of the amount that stood to his credit at the end of the fourth year. On receipt of an application, the Accounts Office after satisfying itself that the withdrawal amount is not more than the prescribed limit (i.e., 50%) and that prescribed amount has been made by the subscriber, may permit him / her to withdraw the amount. The amount withdrawn is then entered in the pass book by the Account Office. After the expiry of fifteen years from the end of the year in which the initial subscription was made by him, the subscriber can withdraw the entire balance standing to his credit. If the subscriber wishes to continue with the account after fifteen years, he needs to exercise an option with the Account Office that he would continue to subscribe for a further block period of 5 years. In the event of a subscriber opting to subscribe for the aforesaid block period, he shall be eligible to make partial withdrawals not exceeding one every year. This is subject to the condition that that the total amount of the withdrawals during the 5 year block period shall be maximum upto sixty percent of the balance at the credit at the commencement of the said period. A subscriber may at his option (which is to be exercised before the expiry of the first year of every extended block period) avail of this facility for a further block of 5 years on expiry of 20 or 25 years or so from the end of the year in which the initial subscription was made. An individual who has made a subscription on behalf of a minor of whom he is the guardian, shall be entitled to withdraw any amount from the Fund. The withdrawn amount in this case is used only for the use of the minor.
Loans
A subscriber, after the expiry of one year from the end of the financial year in which the initial subscription was made but before the expiry of five years from the end of the financial year in which initial subscription was made, can obtain a loan from the fund. Thus the first loan can be taken in the third financial year from the financial year in which the account was opened. The maximum amount admissible to him is equal to twenty five percent of the amount that stood to his credit at the end of the first financial year. If one takes a loan in the fourth, fifth or sixth financial year he is allowed to take 25% of the balance that stands to his credit in the second, third and fourth financial year respectively. No subscriber is allowed to take a fresh loan unless the previous loan is repaid in full along with the interest thereon. The loan can be taken only once in a year even if the loan taken in the year is repaid in the same year. The loan is repaid before the expiry of 3 years from the first day of the month following the month in which the loan is sanctioned. The repayment can be done either in a lumpsum or in minimum two or maximum of thirty six months. This is credited to the subscriber's account. After full repayment of the principal amount of the loan, the subscriber has to pay the interest at the rate of one percent per annum in maximum of two monthly installments of the principal. This commences from the first day of the month following the month in which the loan is drawn up to the last day of the month in which the last installment of the loan is repaid. The interest rate would be hiked to six percent a year if the loan, or a part of it, remains unpaid even after thirty six months.
Nominations and Repayment after Death
A subscriber can nominate one or more persons to receive the amount in case of the death of the subscriber. By nominating a person, the entire amount that stand to the subscriber's credit in the Fund shall be payable to his / her nominee. The nominee(s) receives the amount before the amount becomes payable or has not been paid. No nominations can be made in case the account is opened on behalf of a minor. In case the subscriber does not make any nomination, the balance if it is upto Rs.1 lakh that stands to his credit is paid by the Accounts Office to the legal heirs of the deceased. If the balance is more than Rs.1 lakh, the production of Succession Certificate becomes necessary.
Tax Benefits
The PPF scheme offers the tax benefit to the investment up to Rs.70,000 under Section 88 of the Income tax Act, 1961. The interest credited to the fund including interest allowed during the extended period and withdrawals from the fund are exempt from income tax. The interest credited in the PPF account is not treated as reinvestment for the purpose of Section 88 of the Income Tax Act. This is so because it is totally tax free and does not form part of the taxable income.Furthermore, the balance in the PPF account is completely free from wealth tax. The contribution paid into the fund in repayment of loans will not be eligible for rebate under Section 88 of the Income Tax Act. Deposits in the name of wife/minor children also qualify for deduction of Section 88 of Income Tax Act, 1961.
Transfer of Account
The account can be transferred at the request of the subscriber from one post office to another. The account standing in the State Bank or nationalised bank can also be transferred to post office and vice versa. However, the accounts cannot be transferred from one person to another. In the event of the death of the subscriber, the nominee cannot continue the account of the deceased subscriber in his name.
On Maturity of Accounts
The account can be closed after the expiry of fifteen years from the close of the financial year in which the initial subscription was made. The closing of accounts is optional. The subscriber can continue to make deposit in the account even after the period of fifteen years for one or more blocks of 5 years. The subscriber can also stop further deposits in the account after the completion of any block period and continue the account without deposits. Once the account is continued without deposits, for more than a year, the subscriber cannot opt again to continue the account with deposits for a block period of five years. The balance in the account will, however continue to earn interest till it is closed. The subscriber can also make one withdrawal every year from the account. The subscriber, on maturity of the account, can opt either
- To close the account or
- To continue the account for any period without making any further deposits and make one withdrawal in a year. The deposits in the account continue to earn the interest at a normal rate till the time account is closed.
- To continue the account with the usual annual deposits for one or more block periods of 5 years. To avail of this benefit, the subscriber needs to give his option in writing to the Account Office. In case the subscriber does not further deposit in the account that has already matured, he cannot open a new account. This is so, because the facility of extension for further block periods of 5 years has already been provided in the scheme. The subscriber should therefore, extend the account instead of opening the new account.
The total outstanding balance in PPF as on 3st March, 1999 was Rs.3,201crores. The total of Rs.26,771 crores was deposited in the post office saving bank accounts during 1998 - 1999.
Minor who attains Majority
If the account is opened on behalf of the minor and the minor attains majority before the maturity of the account, then the ex-minor would himself continue the account. For continuing the account himself, he needs to submit the revised application form for opening the account to the Account Office. His signature on the form for this purpose needs to get attested by the guardian who opened his account or by respectable person who is known to the Account Office.
Other Provisions
The amount that stands to the credit of any subscriber in the Fund shall not be subject to any decree or order of any court in respect to any debt or liability incurred by the subscriber. Neither any prosecution or legal proceedings would be carried out against any subscriber for anything which is in good faith done or intended to be done under the PPF Act or Scheme.
Power to remove Difficulties
If any difficulty arises in giving effect to the provisions of the Act or the scheme, the Central Government is authorised to make such provisions which are not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for the removal of the difficulty. This is subject to the condition, that no such order shall be made after the expiration of three years from the commencement of this Act. In case any order is made by the Central Government, it shall be laid before each House of Parliament.
online casino tips (http://www.casinos-go.com/online-casino-tips/index.html) slots (http://www.fortune-slots.com/) fun casinos (http://www.gambling-online-theory.com/casinos/fun-casinos.html) bet online casino (http://www.gambling-online-theory.com/online-casino/bet-online-casino.html) Online casino strategies. (http://www.magical-casino.com/strategy.html) roulette tips (http://www.3wcasinos.com/roulette-tips/index.html) casinos strategy (http://www.gambling-online-theory.com/casinos/casinos-strategy.html) on line casino games (http://www.casino-games-wiki.com/index.php/on_line_casino_games) gambling online bingo (http://www.casino-theory.com/bingo-online/gambling-online-bingo.html) Bonuses in Online Casinos. (http://www.magical-casino.com/online_bonus.html)
free online casino tournament (http://www.casino-theory.com/online-casino-bonus/free-online-casino-tournament.html) diamond club slots (http://www.bestweb-online-casinos.com/slots-game/diamond-club-slots.html) play free online casino (http://www.casino-theory.com/online-casino-royale/play-free-online-casino.html) on line casino games (http://www.casino-games-wiki.com/index.php/on_line_casino_games) Casino Downloading Action. (http://www.magical-casino.com/casino_download.html) casino games online (http://www.casino-games-wiki.com/index.php/casino_games_online) free online casino tournament (http://www.casino-theory.com/online-casino-bonus/free-online-casino-tournament.html) craps (http://www.web-craps.com) Online casino games. (http://www.magical-casino.com/online_games.html) play free online casino (http://www.casino-theory.com/online-casino-royale/play-free-online-casino.html)
