When it comes to building a long term corpus for purposes like retirement, children’s education, nothing beats the popular Public Provident Fund (PPF) scheme in the country as it provides guaranteed tax-free return which is much higher than fixed deposit returns. Worth mentioning that PPF investments are categorised under EEE or ‘Exempt Exempt Exempt’ category, meaning that the money you invest in PPF, annual interest received in this account and maturity proceeds are exempt from income tax.
However, there are certain rules one should follow to keep his PPF account regular. Worth mentioning that non-adherence to certain rules may lead to your account being termed as irregular. Having said that, there are five situations in which your PPF account may be declared as “irregular” and you may not get interest credit in your PPF account.
Here are five situations in which your PPF account can become irregular:
1) Annual contributions less than Rs 500
PPF account requires you to deposit a minimum amount of Rs 500 in a year. If you fail to deposit the minimum amount of Rs 500 in a specific financial year, then your PPF account will become irregular
2) Annual contributions more than Rs 1.5 lakh
As contributions to PPF account qualify for tax exemptions under section 80C, there is an upper limit of Rs 1.5 lakh on annual contributions made to PPF account. If any PPF account holder makes more than Rs 1.5 lakh in annual contribution, the excess amount will be treated as irregular subscriptions and will not earn interest.
3) Opening multiple PPF accounts
According to PPF rules, one individual can open only one PPF account in his name. If anybody already has a PPF account in any bank then he can not open another PPF account in a post office or vice-versa. If you open two PPF accounts (one in a post office another in a bank), then your second PPF account will be treated as irregular.
However, parents can open a PPF account on behalf of their minor child. But both parents cannot open separate PPF accounts for one minor child.
4) Opening a PPF account in joint names
PPF rules do not allow opening accounts in joint names. If you open a PPF account in joint names, then that will be termed as irregular and can be closed. However, you can keep another person as a nominee in your PPF account.
5) Contributions after the maturity date
A PPF account matures in 15 years. However, one can extend the maturity of his PPF by a block of five years for multiple times by giving an application to the bank or post office where the deposit is held. If you continue making contributions to your PPF account after the maturity of 15 years without informing your bank or post office then the contributions will be treated as irregular. Neither any interest will be paid on that amount nor any tax benefit will be available under section 80C.