Every quarter, the Public Provident Fund (PPF) announces its predetermined rate of return, which is now 7.1%. PPF investments worth up to Rs 1.5 lakh per year are exempt from taxation under Section 80C of the Income Tax Act. Both the yearly interest and the maturity sum are tax-free.
The account has a 15-year validity span, and the account holder is required to deposit a minimum of Rs. 500 into it each fiscal year.
What happens when an account is inactive
The minimum amount that must be deposited into their PPF account each fiscal year is Rs 500. If you don’t do it, the account becomes inactive.
There are drawbacks to having dormant accounts, even if they will continue to generate interest until they mature in accordance with the rules. You can no longer claim loans against your PPF account if the account is inactive, which could be problematic if you anticipate needing money soon.
How do I reactivate an inactive PPF account?
An inactive PPF account can be revived using the steps below, according to the Axis Bank website.
- To open a PPF account, you must submit a written request to your bank or the local post office branch.
- Following that, you must deposit Rs. 500 plus an additional Rs. 500 for the current fiscal year for each year the account has remained dormant.
- Rs. 50 fine is additionally due for each year that has passed without payment. Along with the application, these deposits must be made at the bank or post office branch.
- The bank or post office branch will evaluate your records when the application and cheque deposit are finished. The account cannot be renewed after the 15-year lock-in term has ended.
Inactive PPF account drawbacks
You can take money out of the PPF account in certain situations, such as when you need to pay for a medical emergency, build or buy a house, send your kids to school, etc. Another choice is to have a loan secured by your PPF account. However, only active accounts with at least one deposit made each year are qualified for these services.
Interest rate Calculation
Every year on March 31st, interest is calculated on the minimum amount (in a PPF Account) between the fifth and the last day of the month.
Income tax does not apply to interest income in any way. The credit balance is completely excluded from wealth tax as well.
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