There are various advantages of investing in Public Provident Fund (PPF). At present, investing in Public Provident Fund is getting an interest rate of 7.1%.
This is an investment where you do not have to pay tax on the investment, interest earned and PPF maturity. But if you are not able to keep the PPF account active due to any reason then you will have to bear the loss.
Disadvantages of account deactivation
1. The government has made a significant change in the PPF rules in 2016. In this, the government has allowed closure of PPF account before maturity in certain situations. The circumstances in which the facility of closure of the account has been given includes the cost of treatment of a life-threatening illness or for the education of the child. However, the subscriber can do so only after the PPF account has been in operation for five years. This facility is not available with inactive PAPF account.
2. Loan can be taken from the PPF account after the third financial year till the end of the sixth financial year. This facility is not available in the frozen PPF account.
3. If the account holder wants to open a PPF account other than the closed PPF account, then the rules do not allow it. No one person can have two PPF accounts. However, the amount of interest is paid on the maturity period on the deposit amount even in the account that has become dormant.
Main reason for account being inactive
According to experts, the main reason for inactive account is not investing even the minimum amount in it. It is mandatory to invest Rs 500 every year in PPF account. The investor has to deposit at least this amount for 15 years. Failure to do so will result in the account becoming inactive. At the same time, investors can get the benefit of income tax exemption under section 80C of Income Tax by investing up to a maximum of Rs 1.5 lakh in a PPF account on an annual basis.
Penalty will have to be paid Rs 50 on annual basis
To reactivate PPF account, you have to visit the bank or post office where you have opened it. Here you will have to fill a form to get the account activated again. After that you have to pay the outstanding amount. That is, for every year you have not deposited, a minimum payment of Rs 500 will have to be made. If you have not deposited for four years then you will have to deposit Rs.2000. Along with this, a penalty of Rs 50 will also have to be paid every year.
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