In case your Personal Provident Fund or PPF account has become inactive, you can take the following steps to revive the same
Public Provident Fund (PPF) is one of the most popular small savings schemes which offers relatively better interest rates in its category.
PPF is a government-backed debt-oriented instrument that fetches a floating rate of interest which is decided by the government every quarter. The interest rate on the PPF savings account is currently is 7.1%. The interest rate is compounded on an annual basis on investments. It is calculated based on the minimum balance in the account between the 5th and the end of every month.
PPF offers the dual benefit of wealth creation through a compounding effect and offers tax relief on income. An individual can invest up to Rs 1.5 lakh per year in a PPF account. PPF comes under the ‘Exempt, exempt, exempt’ or EEE category which means the investment amount, interest earned on interest and the maturity amount are all tax-exempt.
A PPF savings scheme has a maturity of 15 years but investors can withdraw money after 5 years of opening the account based on some conditions. However, any deposits or withdrawals can only be made inactive PPF account. In case your PPF account has become inactive, it can be revived.
Written request
The account holder may write an application to the concerned bank or post office branch where the account was opened. This written request can be made anytime during 15 years period.
Deposit
According to PPF account rules, a dormant account can be reactivated by depositing just Rs 500 in a financial year. Failing to do this will render the account inoperative. So, it is advisable to deposit Rs 500 in a PPF account by March 31 of each financial year cycle to keep the PPF in active mode.
Penalty
In case a PPF account is lying dormant for years then Rs 500 need to deposit for every non-payment year along with Rs 50 penalty per year. This means if an account has been inactive for three years then, Rs 1650 which means Rs 1500 (500×3) deposit plus penalty of Rs 150 (50×3), need to be deposited.
A depositor can withdraw the money after 15 year maturity period or it can be extended for another 5 years, failing which the PPF is covered to ‘extension without contribution’.
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