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The Public Provident Fund (PPF) offers a set rate of return, currently, it is 7.1 per cent for the second quarter of financial year 2023-24. According to section 80C of the Income Tax Act 1961, PPF investments are exempted up to Rs 1.5 lakh annually from taxation. In the PPF case, both annual interest and maturity amounts are tax-free.
The PPF account holder has to deposit at least Rs 500 every year into the account for a 15-year validity period to keep his account activated.
Your PPF account has a lock-in term of 15 years, but you can take money for emergency use from it, like a medical emergency or buying a home etc. The PPF account has several benefits, and one of them is that you can apply for a secured loan through your PPF account. However, these benefits can only be availed by active account holders with yearly deposits.
Why does the PPF account become dormant?
There are chances that you miss mandatory PPF deposits, and hence your account will be inactive, although you will continue to earn a rate of interest. If you want to earn other benefits, you have to activate your account.
How to activate your dormant PPF account?
Here are the steps to activate your dormant PPF account:
- First, you have to write a request letter to your bank or the post office branch, where you have your PPF account.
- After this, you have to deposit Rs 500 for each year that your account has been inactive and Rs 500 for the current financial year.
- You also have to pay Rs 50 for each inactive year as a penalty. All these payments have to be done at your bank account or the post office branch with the application.
- After the application or payment process is completed, the bank or post office branch reviews it. If the lock-in period of 15 years is complete, the account can't be reactivated.
Note: If you have an inactive PPF account, you are not permitted to open another PPF account in your name.
