Ppf taxation

Ppf taxation DEFAULT

How PPF account works

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Popular investment option

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How it is taxed

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Account maturity

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What to do if you want to close your account

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What to do if you want to close your account

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If you want to continue account for block of 5 years

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If you want to continue account for block of 5 years

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Other points to note

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Sours: https://economictimes.indiatimes.com/wealth/invest/how-ppf-account-works/how-it-is-taxed/slideshow/71791347.cms
PPF vs EPF: Interest rate, taxation, withdrawal and other details

PPF vs EPF: Interest rate, taxation, withdrawal and other details 

New Delhi: Saving and investing for retirement is one of the most important financial responsibilities and a lot of people are often confused about which investment instrument to choose to accumulate the retirement corpus. Employee Provident Fund (EPF) and Public Provident Fund (PPF) are two long-term debt investment instruments that are extremely popular. 

Aside from offering guaranteed returns, these investment options also help in saving on income tax. The beauty of these instruments lies in their slow, steady and secure nature. Salaried individuals can take advantage of both EPF and PPF to accumulate a large amount in their retirement kitty. With the power of compounding, even small investments in these vehicles over a period of time result in a big corpus by retirement time. 

What is PPF?

Public Provident Fund (PPF) is a government-backed small saving scheme that offers moderate returns and is loaded with tax benefits, tax exemption and security to capital. The interest earned as well as the returns are not taxable under the Income Tax. The investments in PPF can be made in a lump sum or in a maximum of 12 installments. 

The minimum investment allowed is Rs 500 and the maximum is Rs 1.5 lakh for each financial year. The current interest rate is 7.1% p.a and the tenure of the PPF account is 15 years.

What is EPF?

Employees Provident Fund (EPF) is a retirement benefit scheme for salaried employees. Both the employee and the employer contribute 12 per cent of the basic salary every month to the EPF account. This percentage is pre-set by the government. 

PPF vs EPF: Interest rate, taxation, tax benefits and more:

Return on investment: The current rate of return for an EPF account is 8.5 per cent annually, while it is 7.1 per cent per annum for PPF.

Investment tenure: PPF comes with a lock-in period of 15 years, meaning the amount deposited can be withdrawn on maturity after 15 years. If an investor wants to continue with the scheme after maturity without withdrawing the money, they can extend the account in batches of five years for an unlimited number of times. The amount deposited in an EPF account can be withdrawn at the time of retirement or if the individual has resigned from the job and wants to use the money.

Loan option: Both EPF and PPF allow investors to avail loan facility, with conditions. EPF account holders can avail loans for personal needs against their deposits by submitting required documents and meeting other criteria specified by the EPFO. For PPF, a loan facility is available from the third to the sixth financial year.

Tax implications: EPF and PPF come under the Exempt-Exempt-Exempt (EEE) category, meaning the principal and maturity amount, as well as the interest amount, is tax-free. However, according to new income tax rules, if deposits to EPF and Voluntary Provident Fund (VPF) by an employee exceed Rs 2.5 lakh in a financial year, then the interest earned on the amount exceeding Rs 2.5 lakh will be taxed for the employee.

Conclusion:

EPF appears to be slightly more beneficial to a contributor because of the higher rate of return. Also, EPF has contributions from the employer which is not available in the PPF scheme. While PPF has a tax-exempt limit of Rs 1.5 lakh contribution per financial year, EPF has a tax-exempt cap of Rs 2.5 lakh. 

An EPF account holder can withdraw money for personal needs after a much shorter time limit, while a person cannot do so in PPF until the completion of the 15-year lock-in period. However, EPF is only available to salaried employees. On the other hand, PPF is available for everyone.

Sours: https://www.timesnownews.com/business-economy/personal-finance/article/ppf-vs-epf-interest-rate-taxation-withdrawal-and-other-details/824091
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Sukanya Samriddhi Yojana, PPF, Bank FD: How is interest income taxed?

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Home >Money >Personal Finance >Sukanya Samriddhi Yojana, PPF, Bank FD: How is interest income taxed?

2 min read.Updated: 04 Jul 2021, 11:35 AM ISTSangeeta Ojha

Sukanya Samriddhi Yojana (SSY), Public Provident Fund (PPF), Bank FD are safe investments irrespective of not so lucrative returns

For those investors who want to make safe investments irrespective of not so lucrative returns, bank fixed deposit (FD), Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY) and similar other small savings schemes that offer guaranteed returns are their solutions. However, it is crucial to know the amount of tax that you will have to pay on income generated from these investments. Not all investments that qualify for tax deduction under Section 80C enjoy EEE status for income tax purposes.

What is EEE?

EEE stands for exempt, exempt, exempt. Here, the first exempt means that your investment is allowed for a deduction. So, you don’t have to pay tax on part of the salary that equals the invested amount. Similarly, the second exemption implies that you don’t have to pay any tax on the returns earned during the accumulation phase. The third and final exempt means that your income from the investment would be tax-free in your hands at the time of withdrawal.

EEE status is generally enjoyed by long-term investment vehicles, such as Public Provident Fund and Employees Provident Fund.

Let's take a look at how the interest income on different investments taxed.

How is interest on bank FD taxed?

Interest income from a bank fixed deposit is fully taxable. Bank charges 10% TDS on the interest generated on the investment made in FD.

How is interest in PPF taxed?

PPF qualifies for income tax deduction under section 80C of the Income Tax Act. There is no charge on the interest generated from the investment even after maturity.

How is interest in Sukanya Samriddhi Yojana taxed?

Just like PPF, the Sukanya Samriddhi Yojana, a special investment scheme by the government for the girl child, enjoys EEE status. The investments under SSY qualify for tax deduction under Section 80C.

Bank FD rates

Fixed deposits are a safe investment option that guarantees consistent interest rates, and no market-related risks, with income tax deductions. Top banks in India generally offer 5.4-5.5% interest rates on a fixed deposit of the same period. SBI FD rates vary from 2.9% to 5.4 for different tenures.

Interest rates on small savings schemes including SSY nd PPF

The Centre has kept interest rates on small savings schemes, including PPF and SSY, unchanged for the second quarter. The finance ministry notification read: "The rates of interest on various small savings schemes for the second quarter of the financial year 2021-22 starting from July 1, 2021, and ending on September 30, 2021, shall remain unchanged from the current rates applicable for the first quarter (April 1, 2021 to June 30, 2021) for FY 2021-22."

Sukanya Samriddhi Yojana Account Scheme - 7.6%

Public Provident Fund- 7.1%

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5 benefits of PPF account beyond income tax exemption

Speaking on the PPF account benefits other than income tax exemption under Section 80C of the Income Tax Act; SEBI registered tax and investment expert Jitendra Solanki said, "PPF is one of the high yielding (current PPF interest rate is 7.1 per cent) risk-free investment instruments, which is backed by the Government of India (GoI). It can be used as an avenue to raise fund as well. One can apply for a short-term loan against one's PPF account."

Asked about the top 5 benefits of PPF account beyond income tax exemption Jitendra Solanki listed out the following PPF account benefits:

1] Risk free investment: PPF investment is 100 per cent risk-free as it is a GoI-backed small saving scheme, which is not linked to the stock market movement. In case of bank default, one's PPF balance amount will remain 100 per cent secured. Most importantly, the PPF balance won't be added in ₹5 lakh insurance guaranteed by the GoI to bank account holders.

2] Avenue for fund raiser: In case of financial emergency, a PPF account holder can get short-term loan at mere 1 per cent interest rate per annum. However, one can get this loan against PPF facility only from 3rd to 6th year of PPF account opening. After six years of PPF account opening, one becomes eligible for partial withdrawal from the PPF balance.

3] Unlimited extension facility: A PPF account has 15 years maturity period. But, one can extend one's PPF account in blocks of five years by submitting 'PPF Account Extension Form.' This can be done for unlimited number of times. So, a PPF account holder who has opened PPF account in the nascent phase of one's career can use the PPF account as retirement-oriented investment tool buy using this unlimited extension facility.

4] Ease of investment: A PPF account holder can invest minimum ₹500 and maximum ₹1.5 lakh in one financial year. One can do 12 deposits in one's PPF account in a particular financial year. So, one can deposit money in one's PPF in monthly mode like SIP as well.

5] Compounding benefit: Since, PPF account is a long-term investment. The investor is eligible for interest on interest means compounding benefit on one's deposits.

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Sours: https://www.livemint.com/money/personal-finance/5-benefits-of-ppf-account-beyond-income-tax-exemption-11622692108514.html

Taxation ppf

U.S. Tax Treatment of Indian Public Provident Fund (PPF)

U.S. Tax Treatment of Indian Public Provident Fund (PPF)

Contents

U.S. Tax Treatment of Indian Public Provident Fund (PPF)

U.S Taxation of Indian Public Provident Fund (PPF): A Public Provident Fund in India is a common investment vehicle. It grows tax free for 15-years, and then the investment pays out. For example, if your money is invested in an Indian PPF with a 15 year term, then the money cannot be touched by the investor during that time-period.

The investment grows tax free in India, until it is withdrawn, but the U.S. tax rules and IRS tax treatment is different.

If a U.S. person owns a PPF, they will have a U.S. tax and reporting requirement.

What is an India Public Provident Fund

Technically, the India Public Provident Fund or PPF is not a pension plan — even if it oftentimes used for retirement purposes.

As provided by ICICI:

“Public Provident Fund (PPF) scheme is a popular long term investment option backed by Government of India which offers safety with attractive interest rate and returns that are fully exempted from Tax. Investors can get the facilities such as loan, withdrawal and extension of account.”

Thus, the United States does not (usually) recognize a foreign country, tax-free investment tool as tax-free.

Some foreign investments such as Canadian registered retirement accounts (RRSP) may receive tax-deferred growth treatment, but overall it is rare.

FBAR PPF Reporting

The Public Provident Fund (PPF) is reportable on the FBAR. That is because the FBAR is used to report Foreign Bank and Financial Accounts. The PPF is a foreign account that is housed at a foreign institution, and therefore it is reportable on the FBAR.

The FBAR is filed separately from the tax return. It is reported electronically and directly to FinCEN (Financial Crimes Enforcement Network).

The failure to file may result in FBAR Penalties.

FATCA Form 8938 PPF Reporting

A PPF is also reportable on Form 8938. FATCA is the Foreign Account Tax Compliance Act. It requires the reporting of certain foreign accounts and assets directly to the IRS on Form 8938.

If the form is not filed, it may result in Form 8938 Penalties.

What Can You Do If You are Out of Compliance?

Presuming the money was from legal sources, your best options are either the Traditional IRS Voluntary Disclosure Program, or one of the Streamlined Offshore Disclosure Programs.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure

Contact our firm todayfor assistance.

Sours: https://www.goldinglawyers.com/fbar-filing-for-public-provident-funds-ppf-india-financial-account-reporting/
How to show PPF interest in ITR - AY 2019 20 - Hema Latha

Public Provident Fund (India)

The Public Provident Fund (PPF) is a savings-cum-tax-saving instrument in India,[1] introduced by the National Savings Institute of the Ministry of Finance in 1968. The aim of the scheme is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits.[2] The scheme is fully guaranteed by the Central Government. Balance in PPF account is not subject to attachment under any order or decree of court. However, Income Tax & other Government authorities can attach the account for recovering tax dues.[3]

Public Provident Fund Scheme, 2019 introduced by the Government on 12 December 2019 and with the new scheme the earlier Public Provident Fund Scheme, 1968 as amended from time to time is rescinded.

Eligibility[edit]

Individuals who are residents of India are eligible to open their account under the Public Provident Fund, and are entitled to tax-free returns.

[edit]

As of August 2018, as per the Indian Ministry of finance (Department of Economic Affairs), NRIs (Non resident Indians) are not allowed to open new PPF accounts. However, they are allowed to continue their existing PPF accounts up to its 15 years maturity period.[4] An amendment to earlier rules allowing NRIs to invest in PPF was proposed in the finance bill 2018, but has not yet been approved.[5]

In October 2017, a notification was passed by the Ministry of finance regarding an amendment to the PPF scheme of 1968, which would deem a PPF account closed from the day a person became a non resident.[6] This led to much confusion.[7] Subsequently, the ministry issued an office memorandum in February 2018 keeping the above notification in abeyance till any further order in this regard, thus bringing the situation to the same stance as earlier.[8]

Investment and returns[edit]

A minimum yearly deposit of ₹500 is required to open and maintain a PPF account. A PPF account holder can deposit a maximum of ₹1.5 lacs in his/her PPF account (including those accounts where he is the guardian) per financial year. There must be a guardian for PPF accounts opened in the name of minor children. Parents can act as guardians in such PPF accounts of minor children. Any amount deposited in excess of ₹1.5 lacs in a financial year will not earn any interest. The amount can be deposited in lump sum or in instalments per year. However, this does not mean a single deposit once in a month.

The Ministry of Finance, Government of India announces the rate of interest for PPF account every quarter. The interest rate compounded annually and paid on 31 March every year. Interest is calculated on the lowest balance between the close of the fifth day and the last day of every month.

Interest rates[edit]

1986–2016[9]

Period Interest Rate
April 1986 – January 2000 12.0%
January 2000 – February 2001 11.0%
March 2001 – February 2002 9.5%
March 2002 – February 2003 9.0%
March 2003 – November 2011 8.0%
December 2011 – March 2012 8.6%
April 2012 – March 2013[10]8.8%
April 2013 – March 2016[11]8.7%

2016–17[edit]

2017–18[edit]

2018–19[edit]

2019–20[edit]

2020–21[edit]

2021–22[edit]

Duration of scheme[edit]

Original duration is 15 years. Thereafter it can either be closed and the entire amount can be withdrawn or on application by the subscriber, it can be extended for 1 or more blocks of 5 years each, with or without making further contributions. [34]

PPF maturity options[edit]

Subscriber has 3 options once the maturity period is over.[35]

  1. Complete withdrawal.
  2. Extend the PPF account with no contribution – PPF account can be extended after the completion of 15 years, subscriber doesn't need to put any amount after the maturity. This is the default option meaning if subscriber doesn't take any action within one year of his PPF account maturity this option activates automatically. Any amount can be withdrawn from the PPF account if the option of extension with no contribution is chosen. Only restriction is only one withdrawal is permitted in a financial year. Rest of the amount keeps earning interest.
  3. Extend the PPF account with contribution - With this option subscriber can put money in his PPF account after extension. If subscriber wants to choose this option then he needs to submit Form H in the bank where he is having a PPF account within one year from the date of maturity (before the completion of 16 yrs in PPF). With this option subscriber can only withdraw maximum 60% of his PPF amount (amount which was there in the PPF account at the beginning of the extended period) within the entire 5 yrs block. Every year only a single withdrawal is permitted.

Loans[edit]

Loan facility available from 3rd financial year up to 6th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 12 December 2019 shall be 1% more than the prevailing interest on PPF.

Public Provident Fund Scheme, 2019 has reduced the interest spread to 1 (one) percent form earlier spread of 2 percent.

Up to a maximum of 25 percent of the balance at the end of the 2nd immediately preceding year would be allowed as loan. Such withdrawals are to be repaid within 36 months.

A second loan could be availed as long as you are within the 3rd and before the 6th year, and only if the first one is fully repaid. Also note that once you become eligible for withdrawals, no loans would be permitted. Inactive accounts or discontinued accounts are not eligible for loan.

Features[edit]

The public provident fund is established by the central government. One can voluntarily open an account with any nationalized bank, selected authorized private bank or post office. The account can be opened in the name of individuals including minor.

  • The minimum amount is ₹500 which can be deposited.
  • The rate of interest at present is 7.1% per annum (as of April 2020).
  • Interest received is tax free.
  • The entire balance can be withdrawn on maturity.
  • The maximum amount which can be deposited every year is ₹150,000 in an account at present.
  • The interest earned on the PPF subscription is compounded annually.
  • All the balance that accumulates over time is exempted from wealth tax.

Withdrawals from PPF account[edit]

There is a lock-in period of 15 years and the money can be withdrawn in full after its maturity period. However, pre-mature withdrawals can be made from the start of the seventh financial year. The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of 4th year preceding year or the end of immediately preceding year whichever is lower.

After 15 years of maturity, the full PPF amount can be withdrawn which is tax free, including the interest amount as well.

Nomination[edit]

Nomination facility is available in the name of one or more persons. The shares of nominees may also be defined by the subscriber.

PPF defaults and revival[edit]

If any contribution of minimum amount in any year is not invested, then the account will be deactivated. To activate the bearer needs to pay ₹50 as penalty for each inactive year. He/she also needs to deposit ₹500 each as each inactive year's contribution.

In case death of account holder then the balance amount will be paid to his nominee or legal heir even before 15 years. Nominees or legal heirs are not eligible to continue the account of the deceased.

If balance amount in the account of a deceased is higher than ₹150,000 then the nominee or legal heir has to prove the identity to claim the amount[3][36]

Premature closure of PPF account[edit]

The Public Provident Fund (Amendment) Scheme, 2016 made changes in Paragraph 9, for sub-rule 3(C) of Public Provident Fund Scheme, 1968 to facilitate the premature closure of PPF Account.[37] Premature closure of PPF account is permitted after completion of 5 years for medical treatment of family members and for higher education of PPF account holder. However, premature closure comes with an interest rate penalty of 1%. As per GOI 12 December 2019 NOTIFICATIONS some new rules for prematurely widrawal added 1. If change in residency have to produce Visa and passport or ITR may be closed the account.2. Higher education of self or dependent on producing fee Bills or admissions confirm letter account may shut.rest rules are same as demise of holder or medical condition of self or dependent.[3][36]

Transfer of PPF account[edit]

The account can be transferred to other branches/ other banks or Post Offices and vice versa upon request by the subscriber. The service is free of charges.[3]

Step 1 – Approach the bank or post office branch where the PPF account is held and ask for the form for making the transfer. The bank or post office will provide you with a form which is to be filled.

Step 2 – The existing bank will then forward the certified copy of the account, the account opening application, nomination form, and specimen signature. It will also forward the cheque/dd for the outstanding amount in the PPF account to the new bank at the branch specified by the customer.

Step 3 – Once your bank receives these documents, the bank will inform you and ask you to submit a new PPF account opening form along with the old PPF passbook. You can also provide nominations for this new account. You will also be required to submit the KYC documents.

Step 4 – If you hold an internet banking facility with your bank, after a few weeks, check that the transferred PPF account now shows up under the PPF account tab/link in your login. If that is not the case, inquire the local bank branch.

PPF tax concessions[edit]

Annual contributions qualify for tax deduction under Section 80C of income tax. The tax benefit is capped at ₹1.5 lacs per financial year.

PPF falls under EEE (Exempt, Exempt, Exempt) tax basket. Contribution to PPF account is eligible for tax benefit under Section 80C of the Income Tax Act. Interest earned is exempt from income tax and maturity proceeds are also exempt from tax.[3]

See also[edit]

References[edit]

External links[edit]

Sours: https://en.wikipedia.org/wiki/Public_Provident_Fund_(India)

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