Public Provident Fund Alert: Excess Deposit Above ₹1.5 Lakh May Earn Zero Interest

Public Provident Fund (PPF): When it comes to safe and reliable investments in India, the Public Provident Fund (PPF) is a top choice for millions of Indians. Due to its government guarantee, fixed returns, and tax-free profits, it remains the preferred choice for millions of Indians. However, this investment’s popularity also harbors a significant misconception.

Many people believe that by opening multiple PPF accounts in different banks or post offices, they can increase their annual investment limit and avail higher tax benefits. If you are considering such a plan, be cautious. According to clear guidelines from the Ministry of Finance, an individual can operate only one PPF account in their own name. In this article, we will explore in detail how violating these rules can be detrimental to your investments.

One Person, One Account

According to the rules of the Public Provident Fund Scheme 2019, an Indian citizen is eligible to open only one PPF account in their own name. Whether you invest in a private bank, a government bank, or through a post office, only one account in your name is valid.

When opening an account by filling out Form 1, it must be clearly declared that the applicant does not already have any other PPF account. This rule was put in place to prevent misuse of the tax exemption and to keep the scheme structure simple. Furthermore, opening joint accounts in PPF is not permitted, thus keeping it a purely personal investment tool.

Accounts in the Name of Minor Children

The government allows parents to open PPF accounts in the names of their minor children or mentally challenged individuals for their future. However, the “one child, one account” rule is strictly enforced here. This means that both parents cannot open separate PPF accounts in the name of the same child.

Only one parent can operate the child’s account. Most importantly, as a guardian, you can deposit a maximum of ₹1.5 lakh in a financial year, both in your own account and your minor child’s account. If the total deposit exceeds this limit, no interest will be paid on the excess amount.

What will happen if you open accounts in different banks

Many investors believe that opening accounts in different institutions will protect them from the system’s detection, but the reality is quite the opposite. In today’s digital age, PPF accounts are fully linked to your PAN and Aadhaar card. Duplicate accounts are immediately detected during the verification process or when data is matched at the time of maturity.

As soon as multiple accounts are detected, the additional accounts are declared invalid. According to Finance Ministry rules, no interest is paid on the additional amount deposited in such irregular accounts, and only the principal amount is returned. This means that your money, lying in that account for years, goes to waste without any profit.

Investment Limits and Security

The primary objective of the PPF scheme is to promote disciplined savings for the medium and long term. Therefore, the government has set a minimum investment limit of ₹500 and a maximum of ₹1.5 lakh per financial year. This limit is to maintain the scheme’s financial balance and prevent high-income earners from taking undue advantage.

If your savings exceed this limit and you prefer a safe investment, the government recommends exploring other options such as the Sukanya Samriddhi Yojana, National Savings Certificates, or ELSS. Only investments made within the established rules can truly benefit you from compound interest in the future.

One Person, One Account

Accounts in the Name of Minor Children

What will happen if you open accounts in different banks

Investment Limits and Security

Vikram Singh

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