The PPF account or Public Provident Fund scheme is one of the most popular long-term saving-cum-investment products, mainly due to its combination of safety, returns and tax savings.

The PPF was first offered to the public in the year 1968 by the Finance Ministry’s National Savings Institute.  Since then it has emerged as a powerful tool to create long-term wealth for investors.

Investors use the PPF as a tool to build a corpus for their retirement by putting aside sums of money regularly, over long periods of time (PPF has a 15-year maturity, and the facility to extend the tenure). With its attractive interest rates and tax benefits, the PPF is a big favourite with a small saver.

Why is the PPF so popular?

PPF is popular because it is one of the safest investment products. i.e., the government of India guarantees your investments in the fund. At the time of writing, PPF offers 7.6% interest, compounded annually. The interest rate is set by the government every quarter. PPF scores over many other investment options mainly because your investment is tax-exempt under section 80C of the Income Tax Act (ITA) and the returns from PPF are also not taxable.

After 15-years, when the PPF account matures make sure to submit Form 4 if you wish to extend the account in a block of 5-years and avail Section 80C tax benefit on fresh deposits.

if the account holder wishes to continue PPF account after 15-years, along with fresh deposits, the same has to be intimated to the accounts office within one year. To extend the PPF account in a block of 5-years, along with fresh deposits, the account holder has to fill Form 4.

According to the Public Provident Fund Scheme 2019 rules, “No deposits can be made in the account if the account holder fails to give his option to continue the account within one year from the date of maturity. Any deposit made in such account shall be treated as irregular and refunded by the accounts office immediately without any interest.”

But, will such deposits be allowed Section 80C tax benefit? The matter was taken up with the Department of Revenue (Central Board of Direct Taxes). The CBDT had clarified that the benefits of Section 80-C of Income Tax Act will not be available on deposits made in PPF account after expiry of 15 years without exercising option for the continuance of the account.

As the PPF account, in such a case, has become irregular, the deposits will not earn tax benefit under Section 80-C of the Income Tax Act unless the account is regularized. For this purpose, the subscriber will have to write to the Ministry of Finance, (DEA) through the Accounts Office for regularizing the account which was continued by him without giving the option.