PPF Account: Under these conditions, your PPF account can become irregular

Public Provident Fund (PPF) is one of the most popular investment plans in India. This is because both aggressive and conservative investors prefer investing in PPF. Being a government backed long-term savings plan it’s considered as a safe investment option. The government decides the interest rate for PPF investments periodically. Currently, PPF interest rate stands at 7.1 per cent and it’s credited to the account annually.

Well, you might wonder why investors prefer this investment option.

It’s important to know about the benefits that come along with PPF investments. A few factors could also turn your PPF account irregular.  

Benefits of PPF investment

The advantages of investing in a PPF have been listed below:

1.   PPF investments are also eligible for tax deductions and enables investors to save more money.

2.   The Central government backs the PPF scheme, therefore, there's minimal risk.

3.   The investment leads to building a corpus fund due to guaranteed return.

What are the reasons for an irregular PPF account?

Multiple PPF accounts: According to PPF rules, one investor is not permitted to open multiple accounts. Therefore, if you try to open a second PPF account with the same name as the first one then the second account becomes irregular. Moreover, it's mandatory to merge the second one with the first account for a seamless investment.

Contributions during extension of the policy: Your account can be irregular in case you keep contributing to the PPF account during the extension of the investment period. The duration of PPF investment is 15 years. Extensions in 5 year blocks are allowed after completing 15 years. For this, the investor first needs to file an application and get approval.

Depositing more than the investment limit: If you deposit more than Rs 1.5 lakh in a PPF account then it can make the account irregular. The surplus amount is refunded automatically and no interest is earned on this amount.  A maximum of Rs 1.5 lakh can only be invested in a PPF account in a financial year.

Joint Holdings: The PPF rules mention that joint holdings are not allowed, however, nominees can be selected. This rule prevails even if the account is created for a minor's welfare. Trying to get a joint PPF account might lead to irregularities.

While PPF accounts can be a great option for investment, there are some precautions that should be taken. Consider avoiding the above-mentioned errors for a seamless experience.