Personal Finance

Sunday, 22 March 2015

Public Provident Fund (PPF) Partial Withdrawal Rules

Though PPF is supposed to be a long term investment vehicle where the entire amount in the PPF account could be withdrawn only on maturity (i.e. After completion of 15 years. Read: What is the duration of PPF account?). However, in case of financial emergency subscriber may opt for partial withdrawals from his account subject to certain rules.

Eligibility for PPF partial withdrawal

When subscriber is eligible to withdraw can be explained in two ways, though they both mean the same thing.

Anytime after the expiry of five years from the end of the financial year in which the initial subscription is made, one withdrawal, once a year, is allowed.
As Example An account opened in January 2010 will be eligible for partial withdrawal from April, 2015. To explain it further, as I said above - from the end of the financial year in which the initial subscription is made. If the account is opened in Jan, 2010 so the end of the financial year would be 31st Mar, 2010. Expiry of five years from the end of the financial year can be counted as -
- Apr, 2010 – Mar, 2011.
- Apr, 2011 – Mar, 2012.
- Apr, 2012 – Mar, 2013.
- Apr, 2013 – Mar, 2014.
- Apr, 2014 – Mar, 2015.
Thus partial withdrawal will be allowed from April, 2015.
The second way to say the same thing is one withdrawal, once a year, is allowed from the beginning of 7th year. If we take the same example where account is opened in January, 2010 the subscriber will be eligible for partial withdrawal from April, 2015. Since the account is opened in Jan, 2010 which means financial year 2009-2010. Now, if we count till the beginning of the seventh year that count will go like -
- Apr, 2009 – Mar, 2010.
- Apr, 2010 – Mar, 2011.
- Apr, 2011 – Mar, 2012.
- Apr, 2012 – Mar, 2013.
- Apr, 2013 – Mar, 2014.
- Apr, 2014 – Mar, 2015.
So the beginning of the 7th year in this case would be Apr, 2015.

Amount that can be withdrawn

The amount that can be withdrawn is subject to the following rule -

Subscriber can withdraw an amount not exceeding the lower of:

50% of the balance at the end of the 4th year immediately preceding the year of withdrawal.
50% of the balance at the end of the year immediately preceding the year of withdrawal.

Lets's see it with an example -

For a partial withdrawal requested in April 2015, the amount of withdrawal will be limited to 50% of the lower of the balances standing to subscriber's credit as on -

March 31, 2012 (4th immediately preceding year from FY April, 2015 - March, 2016).
March 31, 2015 (Immediately preceding year from FY April, 2015 - March, 2016).

Form required for PPF Withdrawal

If you want to apply for partial withdrawals you can submit request using Form C through the bank where you maintain your PPF account.

Points to note -

PPF maturity duration is 15 years.
Pre-mature closure of a PPF account is permissible only in case of death.
Partial withdrawal is available from the starting of the 7th financial year after the initial subscription is made.
One withdrawal once a year is allowed.

That's all for this topic Public Provident Fund (PPF) Partial Withdrawal Rules. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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Sukanya Samriddhi Account (SSY) Pre-Mature Closure And Partial Withdrawal Rules

The duration of the Sukanya Samriddhi account is 21 years from the date of the opening of the account. But there are some scenarios when SSY account is permitted to be closed prematurely.

Beneficiary getting married

SSY account can be closed if marriage of the account holder (girl child) takes place before the completion of 21 years of SSY account.

Earlier SSY account has to be closed in case of marriage but as per new rules, in case of marriage, pre mature closure of the SSY account is allowed with in a month before the marriage or with in three months after the marriage. If SSY account is not closed with in that window, in case of marriage, then it has to be continued till maturity (i.e. 21 years).

If SSY account has to be closed in case of marriage proper proof has to be given that girl is over 18 at that time

Untimely death of the account holder

In the unfortunate event of death of the account holder (girl child), the account shall be closed immediately on production of death certificate issued by the competent authority. In that case the balance at the credit of the account shall be paid along with the accrued interest till the month preceding the month of premature closure of the account, to the guardian of the account holder.

Hardship to the account holder

The other case when Sukanya Samriddhi Yojana account can be closed prematurely is when the central government is satisfied that operation of the account or continuation of the account is causing undue hardship to the account holder (guardian). Authorities may allow pre-mature closure of the SSY account only in cases of extreme compassionate grounds such as medical support in life threatening diseases, death etc. The application for pre-mature closure in this case has to be given with the proper reason.

There is one condition though in this case, pre mature closure is permitted only after the completion of five years of the SSY account opening.

Resident status change for the beneficiary

SSY account is only for resident Indian. After the opening of SSY account, if the account holder becomes a NRI or non-citizen; as per rule no interest shall be deemed to accrue to the account from the day of change in status and the SSY account shall be deemed to be closed prematurely from that date. The intimation for the change in residential status shall be given by the guardian or the accout holder to the concerned post office or bank with in the period of one month from the date of change in citizenship status.

Pre-mature closure for any other reason

Apart from all these scenarios premature closure of the SSY account may be permitted anytime after the opening of an account but in that case the whole deposit shall be eligible only for the interest rate prescribed for the Post Office Savings Bank.

Partial withdrawal rules

Partial withdrawal is permitted, to meet the financial requirements of the account holder for the purpose of higher education.

In this cases partial withdrawal up to fifty percent of the balance at the credit, at the end of preceding financial year shall be allowed. This partial withdrawal will be allowed only when the account holder girl child attains the age of eighteen years or has passed 10th standard, whichever is earlier.

Let's clarify it with an example - If an account is opened for a girl child whose birth date is 10th Aug 2014 then her 18th birthday would be on Aug 10th 2032. Now if fifty percent withdrawal is requested then the sanctioned amount would be the fifty percent of the amount in the SSY account as of 31st march, 2032.

In case you are opting for partial withdrawal to cover higher educaton expenses you need to provide documentary proof in the form of a confirmed offer of admission of the account holder in an educational institution or a fee-slip from such institution clarifying such financial requirement.

Partial withdrawal may be made as one lump-sum or in istalments, not exceeding one per year, for a maximum of five years.

The partial withdrawal is restricted to the actual demand of fee and other admission charges as per the submitted document. So if amount for fee and other charges is coming to less than 50% of the account balance then you are eligible for partial withdrawal upto the amount for fee and other charges.

Points to note -

Pre-mature closure of the account is permitted in case of the death of the account holder or when it is causing extreme hardship to the depositor to carry on the operation of the account.
NRIs or non-citizens are not permitted to hold SSY account. In case there is a change of status in citizenship of the account holder, SSY account shall be considered closed.
Partial withdrawal up to 50% is permitted in case of higher education of the girl child.
Partial withdrawal is allowed only when the account holder girl child attains the age of eighteen years or has passed 10th standard, whichever is earlier
After the marriage of the girl child SSY account can be closed even if 21 years of SSY account are not completed.

That's all for this topic Sukanya Samriddhi Account (SSY) Pre-Mature Closure And Partial Withdrawal Rules. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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Friday, 20 March 2015

Sukanya Samriddhi Yojana (SSY) Account Duration

The duration of the SSY account is 21 years. Please note that it is 21 years from the date of the opening of the account not when the girl attains the age of 21 years.

There is one exception to the rule - If the marriage of the account holder (girl child) takes place before the completion of those 21 years, then you have an option to close the SSY account.

Earlier SSY account has to be closed in case of marriage but as per new rules that mandatory closing clause has been tweaked.

Now a window is provided when SSY account can be closed in case account holder is getting married. The duration in which the account can be closed is; with in one month before the marriage or with in three months after marriage.

So there is a window of four months in which SSY account can be closed in case of marriage. If SSY account is not closed with in that duration then it has to be continued till maturity (i.e. 21 years).

In the case of the closing of the account because of the marriage of the account holder, the account holder shall have to give an affidavit to the effect that she is not less than eighteen years of age as on the date of closing of the account, in that way it also ensures that at the time of marriage girl is at least 18 years old :).

Refer Sukanya Samriddhi Account (SSY) Pre-Mature Closure And Partial Withdrawal Rules to see other scenarios when SSY account can be closed prematurely.

Deposit for first 14 years only

Deposit in the Sukanya Samriddhi Account needs to be done for first 14 years only from the date of opening of the account, i.e. deposit of a minimum of Rs. 1,000 and a maximum of Rs. 1,50,000 has to be done for 14 years only, since the maturity of the account is after 21 years (apart from the exception of the marriage of the account holder) which means for the last 7 years of the SSY account no deposit has to be made. Account will keep earning the prevailing interest rate till it matures.

Closure of the account after maturity

On maturity of the Sukanya Samriddhi Account the principal along with the accrued interest shall be payable to the account holder on the production of -

Withdrawal Slip.
SSY passbook.

What if the Account is not closed at the time of maturity

In case account is not closed when it matures (i.e. after 21 years of opening of the account). No interest will be paid once the SSY account completes twenty-one years from the date of its opening. Note that earlier rule was prevailing interest rate for the Sukanya Samriddhi Yojana shall be payable on the balance in the account till final closure of the account. Now that won't happen and no interest will be paid.

Points to note -

The duration of SSY account is 21 years from the date of opening of the account.
It can be closed before that period of 21 years if girl is getting married before completion of that duration of 21 years. In that case Account holder has to submit an affidavit to the effect that she is not less than eighteen years of age as on the date of closing of the account
If SSY account is not closed even after 21 years it won't fetch any interest after the completion of 21 years.

That's all for this topic Sukanya Samriddhi Yojana (SSY) Account Duration. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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Thursday, 19 March 2015

Public Provident Fund (PPF) Deposit Rules

We do need to invest our savings in order to earn interest and maximize our returns. PPF, because of its flexibility, rate of return and benefit of tax deduction is one such financial product which should be part of everybody's investment portfolio.

PPF is considered one of the safest long term investments with duration of 15 years. Since, money has to be invested in PPF account for the duration of 15 years at least (Read: PPF maturity options for more details), so it is very important to know three things -

What are the minimum and maximum deposit limits for PPF account so that PPF account doesn’t get discontinued and we get maximum returns out of our PPF account.
When to deposit in order to maximize the return.
What will happen if subscriber fails to deposit even the minimum deposit in any given year.

In this post I'll try to explain the above points so that you know how much to deposit in your PPF account and when to deposit in order to maximize the returns.

Deposit limit for PPF

With in a given financial year a minimum of Rs. 500 to a maximum of Rs.1.50 lakhs may be deposited in a PPF account. The subscriber should not deposit more than Rs.1.50 lakhs per annum as the excess amount will neither earn any interest nor will be eligible for rebate under Income Tax Act.

How much to Deposit

The amount can be deposited in lump sum or in convenient installments not more than 12 Installments in a year subject to total deposit of Rs.1,50,000 with in a fiscal year (Based on the current exemption limit).

It is not mandatory to make a deposit in every month of the year. The amount of deposit can be varied to suit the convenience of the account holders.

It is also not mandatory that the same amount must be deposited every year. If a person has funds he can deposit the maximum i.e. Rs 1,50,000. If in any given year person has shortage of funds then he can deposit what ever is possible, but at least Rs. 500 which is the minimum limit. This flexibility of the investment makes PPF unique.

There is some confusion over any restriction on the number of deposits done in a month. Bank of India PPF rules say two installments in a month. But I have also heard people saying they have made 4 deposits in a month. So please let me know if any body has any knowledge about any restriction on the number of monthly deposits.

I see it this way if a person has enough money to make more than 2 deposits in a month that too between the 1st and 5th of that month (Read: Why deposit should be made between 1st and 5th of any month), then person can very well club it in with in 2 deposits. If a person is making a third deposit after 5th, it would be better to make that deposit between the 1st and 5th of the next month.

When to deposit

The interest on balance in the PPF account is compounded annually and is credited at the end of the year. But the point to remember is that the interest calculation is done every month which means the interest is calculated on lowest balances in account between 5th and last day of the month. So, if one doesn't deposit on or before the 5th of a month, one doesn't earn interest for that month. (Read : How is the interest on the PPF calculated? for more details)

Deposits in Minor Account

The amounts deposited in one's own account and those of one's children and spouse can be deducted from income under section 80C but make sure that the total deposit in all those accounts doesn't cross the maximum limit of Rs. 1,50,000.

Discontinuation of PPF account

The minimum amount that has to be deposited in a PPF account with in a financial year is Rs. 500. If in any financial year subscriber fails to deposit that minimum amount, the account will be treated as discontinued.

If an account is discontinued the subscriber will not be entitled to obtain a loan or make a partial withdrawal unless the account is revived.

Please note that even if the PPF account is discontinued it will continue to earn interest.

How to revive a discontinued PPF account-

A discontinued PPF account can be revived by paying a default fee of Rs. 50 for each defaulted year, along with subscription arrears of Rs. 500 for each such year.

Points to note -

The deposits shall be in multiple of Rs.100 subject to minimum amount of Rs.500.
Maximum limit is Rs. 1,50,000 which is the current exemption limit, so if there is any increase in exemption limit then the maximum investment limit in the PPF account may increase too.
Failing to deposit minimum deposit requirement of Rs. 500 in a fiscal year will result in the discontinuation of the PPF account.
Discontinued account will still earn interest.
No loan or partial withdrawal is permitted if the account is discontinued.
Discontinued PPF account can be revived by paying the penalty and the subscription amount for the defaulted years.

That's all for this topic Public Provident Fund (PPF) Deposit Rules. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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Tuesday, 10 March 2015

Sukanya Samriddhi Yojana (SSY) Account Interest Rate

For the Financial Year 2015-16 government has declared Interest Rate of 9.2% on the Sukanya Samriddhi Yojana. Please note that the interest rate is not fixed and linked to the government bond yield. SSY will offer 75 basis points higher than the 10-year government bond yield for the previous year.

Update: Earlier the interest rates for the small saving schemes like PPF, SSY, NSC used to be declared annually once. From FY 2016 - 2017 the rate of interest will be reviewed every three months so interest rate on small saving schemes will be fixed on quarterly basis and may change every quarter.

As per latest update govt. has slashed rate for small saving schemes by 0.2 percentage point for the quarter January, 2018 - March 2018 from the rates applicable in the previous quarter. That means interest rate for SSY will be 8.1% in that period.

Interest Rates for SSY

April 1, 2016 - June 30, 2016 : 8.60%
July 1, 2016 - September 30, 2016 : 8.60% 
October 1, 2016 - December 31, 2016 : 8.50% 
January 1, 2017 - March 31, 2017 : 8.50%
April 1, 2017 - June 30, 2017 : 8.40%
July 1, 2017 - September 30, 2017 : 8.30%
October 1, 2017 - December 31, 2017 : 8.30% 
January 1, 2018 - March 31, 2018 : 8.10%

Points to note -

Interest rate for SSY is not fixed and subject to change every quarter from FY 2016 - 2017.
One of the highest rates of interest offered by Government on small savings scheme.
Interest earned is tax free.
PPF offers 25 basis points higher than the yield of 10-year government bonds where as SSY offers 75 basis points higher than the yield of 10-year government bonds so Sukanya Samriddhi Yoajana may always give a little higher return than PPF.

That's all for this topic Sukanya Samriddhi Yojana (SSY) Account Interest Rate. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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Deposit Rules For Sukanya Samriddhi Yojana (SSY) Account

In this post we'll see what are the deposit rules for Sukanya Samriddhi Accout, for how long do you need to deposit in the SSY account and what is the best time to make a deposit in SSY.

Deposit while opening SSY account

The account can be opened with an initial deposit of minimum of Rs.1,000. Thereafter any amount in the multiples of Rs.100 may be deposited with a requirement of minimum deposit of Rs.1,000 and maximum deposit of Rs. 1,50,000 (Current 80C limit) in a financial year.

Refer: How and Where to Open Sukanya Samriddhi Yojana (SSY) Account to know more about opening SSY account.

Limit on number of deposits

There is no limit on number of deposits either in a month or in a Financial year subject to the maximum deposit of 1,50,000 and minimum deposit of Rs. 1,000 in a financial year.

Mode of deposit

The deposit mode may be -

Cash
Cheque or demand draft drawn in favour of the Postmaster of the concerned post office or the Manager of the concerned bank where the account is opened. That cheque or DD needs to be endorsed on the back by depositor's signature and indicating the name of the account holder and the account number.
Through e-transfer in the concerned post office or bank.

When deposit is done by cheque or demand draft, the date of encashment of the cheque or demand draft shall be the date of credit to the account.

Deposit for first 14 years only

Refer Sukanya Samriddhi Yojana (SSY) Account Duration to get more information about the duration of SSY account.

Best time to deposit in SSY

The interest on balance in the SSY account is compounded annually and is credited at the end of the year. But the point to remember is that the interest calculation is done every month for that interest is calculated on lowest balance in account between 10th and last day of the month.

This means, if you want your deposit to get interest for the month it was deposited, you should make that deposit in SSY account by the 10th of that month.

Discontinuation of SSY Account

If minimum Rs. 1,000 is not deposited in a financial year, account will become discontinued and can be revived on a payment of a penalty of Rs. 50 per year along with minimum deposit amount (Rs. 1,000) for the year(s) of default.

Points to note -

Minimum deposit limit in a financial year is Rs. 1,000 and maximum limit is Rs. 1,50,000.
The maximum limit is linked to the exemption provided under Sec 80C, if exemption limit is increased under 80C maximum limit allowed under Sukanya Samriddhi Account may increase too.
In case of 2 accounts maximum contribution to both accounts combined should not exceed the maximum limit of Rs. 1,50,000.
Thought the SSY account matures after 21 years, but deposit has to be done for the first 14 years only.
Failure to deposit the minimum specified amount of Rs. 1,000 in a financial year will lead to the discontinuation of account.

That's all for this topic Deposit Rules For Sukanya Samriddhi Yojana (SSY) Account. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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Monday, 9 March 2015

Eligibility For Opening a Sukanya Samriddhi Yojana (SSY) Account

There are certain rules and restrictions for opening and operating Sukanya Samriddhi Yojana account. It is always advisable to check the eligibility criteria for any scheme to ensure compliance. In this post we'll see who is eligible for opening a Sukanya Samriddhi Yojana (SSY) account.

Only for girl child

Well, the biggest restriction is you have to be a parent of a girl child not older than 10 years :). OK apart from natural guardian(s), legal guardian(s) can also open an account but note that SSY account can be opened for a girl child only (no older than 10 years).

Grace Period

Only for the financial year 2015-2016 a grace period of one year was provided. With this, a girl child who is born between Dec. 2nd, 2003 and Dec 1st, 2004 was eligible to open an account by Dec 1st, 2015 at the latest.

How many accounts can be opened

A parent can open an account for a maximum of two daughters, but the total investment in the two accounts cannot exceed Rs 1.5 lakh a year.

Refer How and Where to Open Sukanya Samriddhi Yojana (SSY) Account to see the formalities for opening SSY account.

Third SSY account is permitted

Though natural or legal guardian(s) are allowed to open the account for two girl children only there is an exception to the rule. The third Sukanya Samriddhi Account is permitted in the event of birth of twin girls as second birth or if the first birth itself results in a triplet of girls. In this case, certificate from the competent medical authorities, where the twins or triplets were born, has to be produced.

Points to note -

Legal /natural guardian(s) can open account in the name of the girl child
Account can be opened only if the girl child is 10 years of age or less.
Grace period of one year provided only for this year (2015)
Budget 2015 has made this scheme quite attractive for the investors as the interest income has been exempted from tax.
In case you have a girl child less than 10 years of age and you already have a PPF account, Sukanya Samriddhi Yojana account should also be opened and some amount deposited in it as it is also EEE and provides better interest rate than PPF. As per the existing rules prevailing interest rate on SSY will be 0.5% more than the interest rate on PPF.

That's all for this topic Eligibility For Opening a Sukanya Samriddhi Yojana (SSY) Account. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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