PPF Limit

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Introduction

The Public Provident Fund (PPF) is one of the most popular small savings schemes in India. It is a government-backed investment tool that offers attractive interest rates and tax benefits under the EEE scheme (Exempt-Exempt-Exempt). The PPF account is suitable for individuals seeking long-term savings with a secure return. However, there are specific PPF limit related to deposits, withdrawals, and loans that investors need to be aware of.

This guide will provide an in-depth understanding of the PPF limit, including PPF deposit limits, withdrawal limits, loan applicability, and tax exemptions.

PPF Deposit Limit

The PPF deposit limit determines the minimum and maximum amount an individual can contribute to their PPF account in a financial year.

Minimum and Maximum Deposit Limits

The minimum deposit required to keep a PPF account active is Rs. 500 per financial year.
The maximum amount that can be deposited in a PPF account is Rs. 1.5 lakh per financial year.
Deposits can be made in a lump sum or in 12 installments within a financial year.
Contributions exceeding Rs. 1.5 lakh in a financial year will not earn interest and will not be eligible for tax deductions.

Deposit Frequency

An individual can make deposits in the PPF account up to 12 times a year.
There is no restriction on the amount per deposit, as long as the total deposit does not exceed Rs. 1.5 lakh in a year.

Tax Benefits on PPF Deposits

Deposits made in a PPF account qualify for tax deductions under Section 80C of the Income Tax Act.
Interest earned and maturity proceeds are completely tax-free under the EEE (Exempt-Exempt-Exempt) scheme.

You may also want to know the SCSS Rules

Withdrawal Limit from the PPF Account

PPF allows partial withdrawals under specific conditions, even though it is a long-term savings scheme.

Withdrawal Eligibility

You can make partial withdrawals from the 7th financial year after opening the account.
An individual can withdraw up to 50% of the balance available at the end of the 4th financial year preceding the withdrawal year or 50% of the balance of the preceding year, whichever is lower.
Only one withdrawal is permitted per financial year.

Full Withdrawal on Maturity

The maturity period of a PPF account is 15 years.
Upon maturity, you can withdraw the entire corpus, including principal and interest, tax-free.
The account holder may choose to extend the PPF account in blocks of 5 years with or without further contributions.

PPF Applicability Limit

Only resident Indian individuals can open a PPF account.
HUFs (Hindu Undivided Families) and NRIs (Non-Resident Indians) are not eligible to open new PPF accounts.
A person can hold only one PPF account in their name.

PPF Limit for Loans

It can avail of a loan against their PPF balance under specific conditions.

Loan Eligibility

You can take loans from the 3rd financial year up to the 6th financial year.
The maximum loan amount is 25% of the balance at the end of the 2nd financial year preceding the loan application.
The interest rate on a PPF loan is 1% higher than the prevailing PPF interest rate.
The loan must be repaid within 36 months (3 years).
If you repay the first loan, you can take a second loan before the 6th year.

You may also want to know the EPF Payment

Conclusion

The Public Provident Fund (PPF) scheme is an excellent long-term savings instrument with attractive interest rates and tax benefits. However, understanding the PPF limits, including deposit limits, withdrawal limits, loan eligibility, and tax exemptions, is crucial to maximizing benefits. Investors should plan their contributions wisely to ensure they remain within the prescribed limits and make the most of this government-backed investment option.

Frequently Asked Questions

What is the maximum deposit limit for a PPF account?

The maximum deposit limit for a PPF account is Rs. 1.5 lakh per financial year.

Can I withdraw my PPF balance before 15 years?

Partial withdrawals are allowed from the 7th year, but full withdrawal is permitted only after 15 years.

Can I take a loan against my PPF balance?

Yes, you can take a loan between the 3rd and 6th financial year for up to 25% of the balance at the end of the 2nd financial year preceding the loan application.

Can I contribute more than Rs. 1.5 lakh to my PPF account?

No, any amount exceeding Rs. 1.5 lakh will not earn interest or qualify for tax deductions.

Can I extend my PPF account after maturity?

Yes, the PPF account can be extended in blocks of 5 years with or without additional contributions.

Are PPF withdrawals taxable?

No, both partial and full withdrawals from a PPF account are completely tax-free.

Can NRIs open a PPF account?

No, NRIs cannot open a new PPF account. However, if they already have an existing account before becoming an NRI, they can continue it till maturity without extensions.

What happens if I fail to deposit the minimum amount in my PPF account?

If the minimum deposit of Rs. 500 per year is not maintained, the PPF account will become inactive, and a penalty fee of Rs. 50 per year will be charged to reactivate it.