Things to know about the PPF
Public Provident Fund (PPF) may be one of the most popular tax-saving schemes, which can be opened in a post office or designated bank branches.It also serves as a retirement-planning tool for many of those who do not have any structured pension plan covering them.
How to take loan against PPF Account?
Public Provident Fund is one of the best investment options under section 80C. The benefit is not confined to the contribution towards your PPF account but also for the contribution made towards your spouse and children.
One more advantage of PPF is you can avail loan against the balance lying on your PPF Account but only after fulfilling few conditions mentioned hereunder:
When Loan against PPF can be taken?
Loan against PPF account can only be availed after completion of one financial year from the time the first subscription is made i.e. 3rd year from the year your account has opened. For example, your first subscription is made on November 2012 (Financial Year 2012-13), then you are eligible to take loan only after March 2014.
Also, the time period in which you can avail loan from your PPF account is from the 3rd year of opening your account to the 6th year i.e. before the expiry of 5 fiscal years. Consider above example, only after March, 2014 and before March, 2018.
Second loan could be taken as long as you are within the 3rd and the 6th year, and only after the first one is fully settled. Also note that no loans would be permitted once you become eligible for withdrawals. Discontinued accounts, dormant or inactive accounts are not eligible for loan.
How much loan can be taken?
The loan can be taken upto a maximum of 25 per cent of the balance lying in your account at the end of the first financial year (if you apply for the loan in the third year). If you apply for a loan in the fourth year, the second year’s balance will be taken in to consideration and so on.
On what Interest rate Loan will be given?The interest rates on loan will be 2% higher than what you are getting on your PPF balance. So, if you are getting 8.5% p.a. on your PPF then the interest rate on loan will be 10.5% p.a.
At present, the rate on interest on PPF balance is 8.7% p.a., so the interest rate on loan against PPF shall be 10.7% p.a.
How to apply for loan?The application to apply for the loan can be downloaded from
http://www.indiapost.gov.in/
The application should be addressed to the manager stating your PPF Account number.
It should also include the time period for which you are taking loan and repayment tenor. The application should also contain details about your previous loans. Your PPF account passbook has to be enclosed and you must sign the requisite form.
What is the repayment tenure?The repayment of the loan shall be made within 36 months. Principal amount and interest amount can be paid separately but before expiry of 36 months.
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