My PPF account will mature in 2022. To get the benefit of compounding, I will extend it in blocks of five years. However, I want to open a PPF account in the name of a minor son. Can I invest the minimum amount of Rs 500-1,000 in the old account and the maximum amount of Rs 1,49,000 in the minor son’s account?
Prableen Bajpai, Founder FinFix® Research & Analytics replies: Rule-3 of the Public Provident Fund (PPF) Scheme, 2019, sets the ‘limits of number of accounts,’ which mentions that in addition to one’s own account, an individual can also open one account on behalf of each minor or a person of unsound mind of whom he or she is the guardian. Further, Rule-4 specifies the ‘limits of subscription,’ which states that the maximum limit of Rs 1.5 lakh by an individual shall be inclusive of the deposits made in an individual’s own account and in the account opened on behalf of the minor. Thus, till the time the total contribution does not exceed Rs 1.5 lakh in a financial year, you can split the amount between the two accounts. The minimum contribution which needs to be made towards an account is Rs 500 in a financial year.
My wife and I, both 72, opened our PPF accounts in 1993 and 1994 respectively. We continue to contribute almost the maximum amount every year even now. Is there any upper time limit beyond which we can’t continue depositing money? Also, can we withdraw the entire amount in one go and close the account? We have reasonable investments in FDs, MFs and shares, but find that the average returns vary between 5- 7% per year only. What can we do to improve this figure to 10 to 15%? I have some liabilities due to which I had given bank guarantees to the Customs department back in 2016. In spite of best efforts to get the case decided, no action has been taken. According to my bank, the BGs are automatically renewable indefinitely. Is this true?
Raj Khosla, Founder and Managing Director, MyMoneyMantra.com replies: After completion of initial 15 years, a PPF account can be extended indefinitely in blocks of five years. However, one is required to inform the respective post office or bank about each extensions by submitting Form H. Otherwise, deposits will be treated as irregular and there will be no tax benefit or interest earning on the fresh contributions made during the period. On extension with contributions, the depositor is allowed to withdraw a maximum of 60% of the balance at the start of each extended block. During this period, one withdrawal can be made each year. Form C is needed for each withdrawal. You can withdraw the entire balance by submitting Form C and terminating the account after completion of the ongoing extension of the PPF account. Currently markets are highly volatile. Therefore, targeting 10-15% annual yield is too ambitious. Being a senior citizen do not switch your corpus to highly risky options; rather target stable returns of 7-8%. Make full use of fixed return schemes such as SCSS, Post Office Monthly Income Scheme, tax free bonds besides using bank FDs and a mix of large cap and balanced mutual funds. Coming to the Bank Guarantee, as per a public notice issued by the Customs Department, a self-renewal clause is in-built in the guarantee. Your bank has rightly pointed out the same. Also, note that bank guarantees normally have a maturity of up to 10 years.
