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Balwant Jain

Tax and Investment Expert ,

All you wanted to know about PPF

 

Questions Answered

Q

guest: My wife and I both have PPF accounts. She deposits her subscription in it from her salary. Her account has completed more than 25 years (after 3 extensions of 5years each. My account has completed 12 years. We wish to withdraw part of the balance from these P.P.F. A/c for purchase of a house. Kindly explain what will be the tax liability, on the amount partly withdrawn from these A/cs.

Balwant Jain: As per the present provisions any payment received from the public provident fund account is fully exempt as per Section 10(11) of the income tax act, 1961.
Q

guest: My PPF account has matured on 1.4.22. I have neither withdrawn the amount nor wish to extend it for a further period of 5 years. I would like to know whether I will continue to get interest on the balance in the account. If yes, till what time or is it till I opt to withdraw the balance?

Balwant Jain: In case you do not extend the PPF either with contribution which can be done for a period of five years at a time, your account automatically gets extended without contribution and you can withdraw any amount form the account not more than once in a year. and you will continue to earn interest on it.
Q

guest: My father passed away in 2021. His PPF account matured and completed 15 years on 31st march 2022. We are six siblings and if we claim that PPF amount, what will be the tax liability in our hands? And if we don’t claim that amount, will the PPF account earn interest further?

Balwant Jain: The share in the PPF account of your father is fully exempt in the hands of all the siblings as any amount received under a will or as inheritance is fully exempt in the hands of the recipient without any limit. On the death of the subscriber, the balance in PPF a/c. does not cease to earn interest. The interest accrues in the account till the end of the month preceding the month in which payment of the deposits is made to the nominee / legal heirs.
Q

guest: My daughter settled in the UK after her Marriage in 2015. Now a British Passport holder. She had opened her PPF a/c in 2010 when she was in service in India till 2014 She does not have any source of income in India now. Can I Deposit Rs. 1.5 lakh every year in her PPF A/c till maturity just to keep it alive or it needs to be closed before maturity period of 15 yrs. Please note I have my own PPF A/c in which I also deposit rs. 1.5 lakh every year. I file my own ITR as a senior citizen.

Balwant Jain: As per the PPF rules a non-resident under FEMA cannot open a PPF account. However, a non-resident can continue to contribute to the existing PPF account which was opened when he was a resident even after he/she becomes a non-resident. The same cannot be extended beyond the initial period of 15 years. The money in such case is non-repatriable and thus the maturity proceeds can only be deposited/credited in the NRO account. However, she can remit upto $1 million from her NRO account every year after paying taxes in respect of the money being remitted if any tax is payable here in India. Since you already are depositing Rs. 1.50 lakhs in your own account and thus availing full tax benefit under Section 80 C, you need not deposit another 1.50 lakhs in her account as it will not result into any additional tax benefit. For keeping this account alive for 15 years you just need to deposit Rs. 500 every year. Moreover, as per the PPF rules a person cannot deposit more than 1.50 lakhs in his PPF account of him and his children account taken together. So if you want to deposit Rs. 1.50 lakhs I would advise you to gift this money to your daughter and let her contribute Rs. 1.50 lakhs from her bank account.
Q

guest: I am a retired person and used to deposit in my PPF a/c to get rebate U/S 80C. My PPF a/c will mature on 31/03/23.I do not want to extend it any further. My daughter is employed and not yet married. She is also a taxpayer and has her own PPF a/c. From next financial year I want to deposit, in my daughter\`s PPF a/c, upto Rs.150000/from my a/c by cheque and claim deduction U/s 80C in my own return. As I understand I can legally claim the rebate. But my tax consultant says that the rebate is not allowed as my daughter is employed and not dependent on me.

Balwant Jain: As per Section 80C you can claim the tax benefits in respect of contribution made towards PPF account of yourself, your spouse and your children. Please note the children need not necessarily be dependent on you. Even you can contribute to her PPF account after her marriage and claim tax benefit under section 80 C. Request your tax consultant to read the exact provision of the law properly.
Q

guest: I am a retired Government Officer and have income from a Pension for which I am filing Income Tax Return every Year. I also have a PPF Account in which I get a sufficient amount as interest every year. This interest earned from PPF is exempt from Tax. Do I have to show this interest income as \`Exempted Income\` anywhere in the Income Tax Return? If yes, in which Column of the ITR Form?

Balwant Jain: Yes, the PPF interest though exempt needs to be disclosed in the ITR form in Schedule EI (Exempt Income).
Q

guest: Sir I have a PPF account for the last 36 years and have a balance of approximately 35 lakhs. Till date I have not shown it in the ITR. Should I show it in the ITR3 form which I have to fill this year. How and where I can show it.

Balwant Jain: You do not have to show details of PPF balances in your ITR form unless your taxable income exceeded Rs. 50 lakhs in the year. However, you are required to disclose the interest received on your PPF account under the EI schedule as the interest on PPF account is fully exempt.
Q

guest: If the PPF matures after my retirement from Govt service, then will it be under EEE Category?

Balwant Jain: PPF maturity proceeds received by you are exempt in your hands whenever you receive them.
Q

V91O5Wje9d: if i invest 1 lac in 2020 and can i show in 2023 ppf 80c deduction?

Balwant Jain: The deduction under Section 80C can only be claimed in the year of payment. So for deposits made in 2020 you can not claim in 2023.
Q

guest: My brother is Working in Sharjah, UAE. He opened his PPF account when he was in India on a visit. He is filling his ITR as a Non-resident. Can he continue his PPF account? Contributions are made from his NRO account.

Balwant Jain: A non-resident is not allowed to open a PPF account. A person becomes a non-resident for banking purposes under FEMA when he leaves India for the purpose of taking up an employment outside India or for conducting any business or profession outside India. One will also become non-resident if one leaves India with an intention to stay outside India for an indefinite period. Your brother had opened PPF account after he became a non resident which is not permitted under the law. Get in touch with the bank where the PPF account is opened to get it closed. Had he opened the PPF account before leaving for UAE, he could continue to contribute to the PPF account for initial 15 years but not allowed to extend this.
Q

guest: My relative who is a resident of India recently became an NRI ( as he is on work permit for more than a year in Canada). Can he continue to contribute to the PPF account now ?If yes, how much??His bank accounts are yet not converted as NRI or NRO accounts as he is likely to return to India after 7 /8 months or so. Can contribution to PPF be made from his foreign income transferred to India in his Savings account in Indian rupee?

Balwant Jain: A person who has become a non-resident cannot open new PPF account nor he can extend his existing PPF account beyond current validity. However non-residents are allowed to continue to invest in the PPF account till its maturity. The contribution can be made from any source whether from Indian account or by transferring money to his saving account in India. He should immediately inform the bank about his residential status and get his existing bank accounts designated as NRO accounts.
Q

guest: Will it be wise to withdraw a portion of my savings in PPF & EPF and invest in NPS ? If yes, then what option should I choose in the NPS ? I meant the one time withdrawal or monthly pension scheme?

Balwant Jain: Please do not do that. Maturity proceeds of EPF and PPF are tax free fully but NPS are exempt only up to 60% and for balance 40% you have to mandatorily buy an annuity.
Q

guest: I opened the PPF account in March 2020. I have deposited around 75000 in the next year. Unfortunately, after that, things started going wrong for me. Right now I am in a huge financial stress, and I want to know if I can withdraw the money from my PPF account. The balance available is around Rs. 1.68 Lakhs. My only daughter is studying in school and, fortunately, we don\`t have any life-threatening disease. Can anything be done in this situation?

Balwant Jain: You cannot close the PPF account as your circumstances are not as prescribed for closing the account but you can partly withdraw after completion of full five financial years.
Q

guest: I am 58 years old. Let me know for the 80 C section which is best to invest in ELSS or PPF? Moreover, interest above rs. 250000 per annum is taxable. Please advise.

Balwant Jain: The answer to your question will depend on for how long can you remain invested in the product. Since you are 58, you will have to take into account the income flow after your retirement, the period which your PPF account has already completed. In case you do not need the money for next seven-year minimum, I would advise you to go for ELSS but only through SIP and not a lump sum. ELSS helps you better your returns. Please note the ceiling of 2.50 is not applicable for PPF and even for EPF it is applicable in respect of contribution and not the interest.
Q

V91O5Wje9d: I am 30 years old and .I have an ppf account since 2 years . Is ppf is good for long time or i have to invest in mutual fund ? Or can we put saving in ppf 50% and mutual fund 50%

Balwant Jain: I have just answered almost an identical question. Since you are young and have long time horizon available to you, you can take the risk of investing in ELSS which will give you better post tax returns in the long run. Please review your portfolio of your mutual fund investment regularly. Also maintain asset allocation suitable to you.
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