The financial year-end is upon us, and for savvy investors utilizing tax-saving investment schemes like the Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), and National Pension System (NPS), a crucial deadline approaches.
Maintaining these accounts in active status requires minimum annual contributions. Here’s a breakdown to ensure your accounts stay active and avoid any penalties:
Understanding Minimum Contributions and Consequences
Scheme | Minimum Annual Contribution | Maximum Annual Contribution | Dormant Account Penalty |
---|---|---|---|
Public Provident Fund (PPF) | ₹500 | ₹1.5 lakh | ₹50 per year of non-compliance (minimum ₹50) |
National Pension System (NPS) | ₹1,000 | No upper limit | ₹100 (one-time penalty) |
Sukanya Samriddhi Yojana (SSY) | ₹250 | ₹1.5 lakh | ₹50 per year of non-compliance (minimum ₹50) |
Public Provident Fund (PPF):
- Minimum Contribution: Every PPF account holder must contribute a minimum of ₹500 annually. This can be done in a lump sum or spread across installments throughout the year.
- Maximum Contribution: The upper limit for annual contributions to a PPF account is ₹1.5 lakh.
- Dormant Account Penalty: If you fail to meet the minimum annual contribution for the financial year, your PPF account will be classified as dormant. To reactivate it, you’ll need to deposit not just the minimum contribution of ₹500 but also a penalty of ₹50 for each year the account remained inactive.
National Pension System (NPS):
- Minimum Contribution: Unlike PPF, NPS requires a slightly higher minimum annual contribution of ₹1,000. However, it offers greater flexibility. You can contribute the entire ₹1,000 in one go or spread it out over the year as per your convenience. But remember, at least one contribution is mandatory during the financial year.
- Maximum Contribution: NPS doesn’t have a maximum limit on contributions, allowing you to invest as much as you want for retirement planning.
- Dormant Account Penalty: Failing to make the minimum contribution of ₹1,000 will render your NPS account inactive. To revive it, you’ll need to make the missed contributions for the dormant years along with the current year’s minimum requirement. Additionally, a one-time penalty of ₹100 applies.
Sukanya Samriddhi Yojana (SSY):
- Minimum Contribution: For SSY accounts, the minimum annual contribution to keep the account active is just ₹250. This offers a lower entry point compared to PPF and NPS.
- Maximum Contribution: Similar to PPF, SSY allows a maximum annual contribution of ₹1.5 lakh.
- Dormant Account Penalty: If you fall short of the minimum ₹250 annual contribution in an SSY account, it will be categorized as dormant. To reactivate it, you’ll have to deposit the missed minimum contribution of ₹250 along with a penalty of ₹50 for each year of non-compliance (minimum penalty ₹50).
Taking Action: How to Revive Your Dormant Account
The process for reviving a dormant account varies slightly across schemes. Here’s a general guideline:
- Contact your Account Provider: Reach out to the bank, post office, or designated agency where you hold your PPF, SSY, or NPS account.
- Calculate Missed Contributions: Determine the total minimum contributions you missed for the years your account remained inactive.
- Prepare Payment: Have the required amount ready, including the missed contributions, current year’s minimum contribution, and any applicable penalty charges. Payment options may include cash deposit, cheque, or online transfer.
- Submit Payment and Revival Form: Complete the necessary form for account reactivation and submit it along with your payment. The specific form might differ depending on the scheme and your account provider.
Remember: Reviving your dormant account is crucial to avoid losing out on potential investment growth and tax benefits associated with these schemes. Don’t wait till the last minute. Take action before March 31st to ensure your accounts remain active and continue contributing towards your financial goals!
Additional Tips:
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Set Up Automatic Contributions: Consider setting up automated contributions through Electronic Clearing Service (ECS) to ensure timely payments and avoid any lapses that could lead to account dormancy.
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Maximize Your Contributions: While meeting the minimum contribution