PPF -PUBLIC PROVIDENT FUND

Public Provident Fund is a very useful and attractive tool for long term personal financial planning. Its simple,easy and fairly well defined except for a few areas of confusion which also I plan to address in this blog.

The rules of it are public and easily available with Google for example www.allbankingsolutions.com/.../Public-Provident-Fund-PPF...

or with the banks so will high light only key aspects and advantages:

1. PPF Account can be opened in any public sector bank and some private sector banks too, BY Indian Residents and by parents on behalf of their minor children.

2. Not for NRIs or OCIs.

3. Flexibility in deposits to keep the account live.

4. Withdrawal in Emergency possible but not advisable.

5. Tax benefits but good even without tax benefits in many cases.

6. Good rate of interest

7. Long term scheme of 15 years.

8. Limited scope for early withdrawals   

9. Can be extended as per your need beyond 15 years, with making contributions or without it.

10. For some senior citizens it can be extended without contribution and it continues to get interest which is not taxable and benefit of compounding on balance amount continues and you can withdraw with out any penalty once in a year.So it is unique unfixed deposit yet getting interest better than fixed deposits.

11. Indian resident Parents can open accounts for minors

Advantages

1. Long term helps in regular savings and discipline

2. Compound interest scheme

3. Very useful for saving for minor children for their higher education or to create a corpus of their own capital for business when they become adults

4. Tax benefits and can deposit 1.5 Lakh per year

5. Good even if not taking tax benefits

6. Can not be attached by any court and guaranteed by Govt of India so very secure.

7. Initial deposit, interest earned as well as on withdrawal it is exempt from all taxes.

Areas of confusion 

1. Why NRIs are not allowed to open the account and have to stop contributing on becoming NRI is not logical, the scheme should be for all Indian passport holders and not only residents.Same is also the case with Senior Citizens Deposit scheme.

2. Minor Children accounts by parents who are NRIs , can they open accounts and continue depositing till becoming adults? Banks should ask and not open such accounts if not eligible.

I feel this policy is not correct and clarification is required as soon as possible. NRI is a temporary status and in many cases these NRIs do not get any similar benefits in foreign countries they are working and home country needs to provide this avenue to them.

What happens to a person who opens his account , becomes an NRI and again becomes a resident Indian ??

What is the policy for minor children accounts opened by their parents when they become NRIs ?

Clarity on such cases as to further contribution, interest eligibility and action if parents again become resident Indians is required.

Those holding Indian passports in my opinion must be allowed to open such accounts for themselves as well as family members including minor children and policy clarified on what happens to their accounts once they give up citizenship and passports and become OCI.