Your PPF account may become irregular: Here’s how
The Public Provident Fund (PPF) is a popular debt investment choice due to its sovereign guarantee and the tax benefits that come along with it. The rules governing PPF accounts, however, are stringent and one needs to be aware of them to take full advantage of it. Non-adherence of these rules can lead to the account being termed as irregular by the government.
When a PPF account becomes irregular, i.e., when it is brought to the notice of the post office that a certain rule has not been followed, the account may be closed, contributions may be returned, and interest payments can be stopped. Regularising the PPF account after this may be a long drawn process. Here are few instances when a PPF account can become irregular.
1. Opening of more than one account
The PPF rules allow only one account to be opened in one name. People having a PPF account in the bank cannot open another account in the post office and vice-versa. Even in the application form, the undertaking goes like this – “I hereby declare that I am not maintaining any other Public Provident Fund Account, except an account on behalf of a Minor.” If two accounts are opened by someone by mistake, the second account will be treated as an irregular account and will not carry any interest unless the two accounts are amalgamated. One has to approach the Ministry of Finance (Department of Economic Affairs) for the approval to amalgamate them.
A PPF account on behalf of a minor can be opened by either the father or mother. To avoid having more than one account, both the parents cannot open a separate account for the same minor. An individual may, therefore, open one PPF account on behalf of each minor of whom he is the guardian.
If contributions in excess of Rs 1.5 lakh are made during a year by the accountholder, the deposits in excess of Rs 1.5 lakh will be treated as irregular subscriptions and will neither carry any interest nor will this excess amount be eligible for tax benefit under Section 80C of the Income Tax Act. This excess amount will be refunded by the post office to the account holder without any interest.
There is no provision to open a joint PPF account. In case it has been opened in joint names, the deposit offices have been authorised to close such irregular accounts. One is allowed to furnish details of a nominee, and not of a joint holder.
The PPF account may be extended indefinitely after the end of the tenure of 15 years. But, it may turn irregular if one continues investing during extension without intimating the post office. If you want to extend the account and even keep making fresh deposits, the post office has to be intimated one year before the expiry in writing by filing up the Form H. If one keeps depositing without furnishing this Form, then all new deposits will be treated as irregular and no interest will be paid on them. The benefits of Section 80C will not be available on deposits made in the PPF account after expiry of 15 years without exercising option for continuance of the account.