Public provident funds or PPF are popular investment options in India because they offer competitive interest rates, reduce taxes, and carry no risk of losing money. Any Indian citizen can begin investing in PPF with just Rs 500 per year. A PPF account can have up to Rs 1.5 lakh deposited in it annually. The PPF account goes dormant after a financial year, if Rs 500 is not deposited. It is vital that the annual prescribed amount be paid into the PPF account since closing the account will also prevent the availability of other PPF advantages. There is no reason to be concerned if the PPF account has been cancelled for whatever reason. A closed PPF account is easily reactivable.
To re-open the PPF account, the account holder will have to go to the bank or post office where the PPF account was opened. To reactivate the account, a form will have to be filled. Along with this, you will have to pay the arrear amount for the years in which you have not deposited the money and will also have to pay a penalty of Rs 50 per year. Suppose your PPF account has been closed for 4 years. So you will have to pay arrears of Rs 2000 as arrear for four years. Along with this, you will have to pay a penalty of Rs 200 at the rate of Rs 50 per year.
In certain situations, the government permitted the closing of PPF accounts prior to their maturity in 2016. These circumstances can include paying for a child’s education or the treatment of a serious disease. You may only do this after five years of PPF account investment. PPF accounts may also be used for loans. A dormant PPF account is not eligible for any of these advantages. As a result, closing a PPF account is not advisable.
Tax exemption is available on investment in PPF under section 80C. At the same time, tax is not to be paid on interest income and also on the amount received on maturity.
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