Public Provident Fund (PPF) is a major investment vehicle in India due to its excellent interest rates, tax savings and no risk of losing money. Any Indian can start investing in PPF with Rs 500 annually. Rs 1.5 lakh can be deposited in PPF account in a year. If Rs 500 is not deposited in a financial year then the PPF account becomes inactive.
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Due to closure of the account, other benefits available through PPF are also not available, hence it is necessary that the prescribed amount be deposited in the PPF account every year. If due to some reason the PPF account has been deactivated then there is no need to worry. Closed PPF account can be activated easily.
This is the process of opening an account
To reopen the PPF account, the account holder will have to go to the bank or post office where the PPF account has been 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.
Calculate like this
Suppose your PPF account has been closed for 4 years. So you will have to pay arrears of Rs 2000 for four years. Along with this, you will have to pay a penalty of Rs 200 at the rate of Rs 50 per year.
Disadvantages of account closure
In 2016, the government has allowed closure of PPF account before maturity in certain circumstances. These situations include expenses for the treatment of a life-threatening illness or the education of a child. But, this can be done only after investing in PPF account for five years. Loan can also be taken from PPF account. All these benefits are not available in inactive PPF account. Therefore, PPF account should not be allowed to be closed.
Tax exemption is available on PPF account
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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