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PPF Rules: The Public Provident Fund (PPF) is one of the most trusted schemes for long-term investment. It currently offers an annual interest rate of 7.1%. Additionally, tax exemptions apply to all three aspects: the investment, the interest earned, and the maturity amount. However, simply opening a PPF account is not enough; certain minor mistakes can impact your returns and other benefits. Let us look at five such common mistakes.

Depositing money after the 5th of the month

It is considered best to deposit money into a PPF account between the 1st and the 5th of the month. Interest is calculated based on the lowest balance maintained between the 5th and the end of the month.

If you deposit money after the 5th of August, that specific amount will not earn interest for August; the interest calculation will begin from September. Therefore, try to make your investment before the 5th of each month.

Investing more than ₹1.5 lakh in a year

A maximum of ₹1.5 lakh can be deposited into a PPF account during a financial year. If an amount exceeding this limit is deposited, the excess amount will earn neither interest nor tax benefits.

Even if the bank or post office inadvertently pays interest on the excess amount, it may be reclaimed later. This limit applies to the total investment across the PPF accounts held by you and your minor children.

Failing to deposit the minimum ₹500

It is mandatory to deposit a minimum of ₹500 in every financial year. Failure to do so renders the PPF account inactive.

Once inactive, you cannot make regular investments, and several associated facilities become unavailable. However, the account can be reactivated by paying a penalty and submitting an application.

Opening more than one PPF account

Opening multiple PPF accounts in your name across different banks or post offices violates the rules. Since PPF accounts are linked to your PAN, additional accounts are easily detected.

Furthermore, opening a joint PPF account is not permitted. Withdrawing money without knowing the rules

The PPF account has a lock-in period of 15 years. However, under specific circumstances, the account can be closed prematurely after the completion of five financial years.

Examples include situations involving a serious illness, children's higher education, or a change in residency status. However, upon premature closure, the interest is recalculated, and the payout is adjusted to reflect an interest rate that is 1% lower. Therefore, it is essential to fully understand the rules before making a decision.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.