If a PPF account holder dies, then according to the rules, the nominee will get the full amount. Nominee has no right to continue that account. Tax benefits on PPF are available at three levels.
Public Provident Fund is a great small saving scheme in which returns are also good and the biggest benefit is about tax. The returns are much higher in this as compared to the most popular fixed deposits and the government also guarantees it. Talking about tax, you get the benefit of tax deduction on investments. Apart from this, both the interest income and maturity are tax free.
Here a question is very important that if the account holder dies prematurely, then what are the rules regarding that. If a PPF account holder dies, the nominee cannot continue that account. After the death of the account holder, the nominee gets all the money including interest. There is no lock-in period for the nominee. The nominee has to submit Form G for this.
Withdrawal facility from 6th year onwards
Explain that Public Provident Fund is a tax saving investment instrument with the longest lock-in period. Its lock-in period is 5 years. Withdrawal facility is available from the sixth year of the financial year in which the account is opened. This account matures in 15 years.
Can be closed even before the lock-in period of 5 years
Apart from this, the PPF account can be closed even before the lock-in period of five years, but there are some conditions. If the account holder, spouse or dependent has a serious illness, then this account can be closed. This account can also be closed in the name of higher education of children or higher education of the account. Even if the account holder becomes an NRI, the account can be closed. However, 1% interest is deducted as pre-mature closure penalty. This is applicable from the account opening date.
Loan facility from the third year
Currently, the interest rate for PPF is 7.1 per cent and is paid on an annual basis. The Finance Ministry decides about the interest every three months. Loan facility is also available against PPF account. If the account is opened in the financial year 2020-21, then the loan facility will be available from the financial year 2022-23. Loan facility is available till the sixth year of the financial year in which the account is opened. The loan will be available only once in a financial year and the second loan will not be available until the first loan is repaid.
How much will be the interest rate on the loan
If the loan is repaid within 36 months, the interest rate will be only 1 per cent, while the interest rate will be 6 per cent if the loan is repaid after 36 months. The calculation of interest starts from the day the loan amount is released.
