Loan on PPF (Public Provident Fund): PPF account is a good option for long-term savings as well as tax saving, as it offers the benefit of tax exemption on interest and maturity amount. In this, tax deduction can also be claimed under section 80C of the Income Tax Act. Apart from these benefits, the PPF account holder can also take advantage of the loan based on the PPF balance in his credit.
Eligibility
Loan under the PPF scheme can be taken from the third to the sixth financial year of the account. If the account was opened in 2020-21, then the loan can be taken from 2022-23. This will be for a period of 36 months. That is, it is a short term loan and it will have to be repaid till that time.
Rate of interest
If the loan amount is repaid before the tenure of 36 months, then the rate of interest applicable will be 1 per cent per annum, which is very low. However, if the amount is repaid after 36 months, interest will be charged at the rate of 6 per cent per annum from the date of loan.
Loan amount
The maximum loan amount that can be availed against PPF account is up to 25% of the balance in the PPF account at the end of the second year. This is the year preceding the year in which you have applied for the loan. For example, if the account holder has applied for a loan in 2022-23, then the maximum loan amount as on 31 March 2021 will be 25 per cent of the balance in the PPF account as on 31 March 2021.
Form
The account holder has to fill Form D to apply for loan against PPF account. In this, the account number and loan amount will have to be mentioned. The account holder will also have to put his signature on this. The PPF account passbook has to be attached with the form and submitted to the bank/post authorities where your PPF account is present.
keep these things in mind
- Only one loan can be taken in a financial year.
- If the first loan has not been repaid, then the second loan cannot be taken.
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