September 02, 2011

PPF: Avoid making these mistakes

Here’s a list of 11 things you need to be careful about while operating your Public Provident Fund Account:

1. Don’t open two PPF accounts in the name of one individual. Even if your current account is inactive, you’re not allowed to open a new PPF a/c.

2. Don’t deposit more than the maximum allowed. You won’t get the interest on excess deposit in your PPF account.

3. Don’t forget to 
deposit a minimum amount of Rs 500 every year to avoid the PPF account become inoperative. You will be denied loans / partial withdrawal before maturity.

4. At the time of extension of PPF account, submit Form H, otherwise the continuation will be deemed as “extension without subscription” or “irregular” and you will be denied interest on additional deposits and also become ineligible to claim section 80C deduction.

5. Don’t forget to nominate, otherwise your family will have to obtain a succession certificate to receive the PPF proceeds in case of your death.

6. Avoid premature withdrawals and loans unless there is an emergency because PPF is one of the best long term saving instrument available to you.

7. Understand that post-maturity of PPF if you choose 'extension without further deposits', you can’t change it to 'continuation with further deposits' after the expiry of one year. So make an informed choice.

8. Don’t recycle the PPF account because it defeats the very purpose of opening a Public Provident Fund account.

9. After the subscriber’s death, nominee should consider closing the PPF account at the earliest instead of continuing it because a nominee can’t appoint a further nominee.

10. While making deposits in your PPF account at the end of the financial year for tax savings purpose ensure that you deposit the cheque / demand draft well in time…remember that date of realization is treated as date of deposit. If the cheque/draft is not encashed by 31st March, the amount will be treated as deposit for the next financial year and you will lose tax benefit for the current financial year. This is as per the amendment made by the Government of India in February 2010 in the Public Provident Fund Scheme. Earlier in case of PPF (unlike other small savings), date of presentation/tender of cheque was treated as date of deposit.

11. Don’t open a PPF account in the name of your HUF because vide an amendment made in the year 2005, PPF account can’t be opened in the name of HUFs although existing accounts are allowed to earn interest till their maturity.Besides, even the existing PPF Account in the name of HUF is not allowed any further extension after the initial maturity period of 16 years.



Source:http://www.themoneyquest.com

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