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Public Provident Fund (PPF) is a popular investment option among taxpayers. PPF gives interest rates at 7.1%. The PPF account offers the benefit of higher interest and tax exemption. However, if the account becomes inactive before the maturity period, the holder will have to pay certain penalties. Here’s what happens when the PPF account is deactivated.
1. Although the PPF account cannot be closed before the maturity period of 15 years, but it can happen in some special cases. After the amendments in the PPF rules in 2016, the PPF account can be closed prematurely for needs like treatment of critical illness, higher education of children, etc. At the same time, the PPF account opened in banks can be closed after the completion of 5 years. But if someone’s PPF account is inactive, then it cannot be closed before the completion of the maturity period.
2. Loan can be taken from the PPF account after the third financial year till the end of the sixth financial year. This facility is not available in the inactive PPF account.
3. If the account holder wants to open another PPF account apart from the inactive one, then he/she will not be able to as one person cannot have two PPF accounts. Also, interest is to be paid on the maturity period on the amount deposited in the account that has become inactive.
How to reactivate
To reactivate your PPF account, you have to visit the bank or post office where you have opened your PPF account. You have to fill a form to re-activate the account. You will also be required to pay any fine and arrear. The arrear amount is for the years till which you have not deposited your PPF amount. Apart from this, you will also have to pay a penalty. This penalty will have to be paid at the rate of Rs 50 per annum.
The calculation of penalties and arrears is quite simple. Assume that your PPF account is closed for 4 years. So you have to pay arrears of Rs 2000 for four years. Along with this, you will have to pay a penalty of Rs 200. By doing this your PPF account will be activated again.