Public Provident Fund (PPF) has always been the most preferred and reliable investment option among the employed and middle-class families who want to save for a secure future. Due to the double benefit of government guarantee, income tax exemption and compound interest, people open these accounts in post offices and nationalized banks for their children's higher education, marriage or retirement planning. But sometimes there are unexpected financial ups and downs in life—like job loss, loss in business or a sudden major medical expense in the family—due to which investors are not able to deposit money into their PPF account regularly. In such a situation, this huge confusion and fear sets in the minds of many account holders that if they do not deposit even a single rupee in the account for four or five consecutive years, will the government confiscate or close their account completely? Will the hard-earned money already deposited in the account be lost or will the interest on it be stopped forever? If you are also stuck in a similar dilemma and are worried about your PPF account lying dormant for years, then the latest rules of the Central Government and the Postal Department are going to give you great relief.
First of all, it is very important to remove this basic fear that if the money is not deposited, the account gets deleted forever. As per the rules of Post Office Small Savings Scheme Rules, if an account holder does not deposit the mandatory minimum amount in a financial year, the account is not completely canceled or sealed, but is declared 'default' or 'discontinued' in banking language. Under the PPF scheme, it is mandatory to deposit at least Rs 500 in every financial year i.e. between April 1 and March 31 and the maximum limit has been fixed at Rs 1.5 lakh. When an investor does not deposit even this minimum installment of Rs 500 for five consecutive years, the core banking system of the bank or post office puts that account in inactive category. This simply means that the account gets frozen but its existence does not cease. Your previously deposited original capital remains completely safe and not a single penny is deducted from your deposited capital by the government or the bank.
The biggest confusion on this subject remains regarding interest because there were some restrictions in the old systems, but the revised rules have made the picture completely clear. Under the Public Provident Fund Scheme notified by the Finance Ministry, even if your account has been defaulted or discontinued, interest will continue to be accrued every year at the applicable rate on the total balance in the account. At present, annual compound interest is being given on PPF at the rate of 7.1 percent and this interest will be automatically credited to your account at the end of every financial year i.e. on 31st March. This interest will continue to be received by the account holder without any interruption until the original maturity period of 15 years of the account is completed. Therefore, do not be under the misconception that your interest will stop by not depositing money; Every penny of interest is added on your deposited capital at the rate decided by the government as per the rules.
Even though your dormant account continues to accrue interest, a default account is subject to more legal and financial restrictions than an active account. The first restriction is that you cannot make any new voluntary deposits or additional investments in that account until the previous account is settled. The second big shock is that the very cheap loan facility available on PPF stops; Generally, there is an exemption to take loan against the deposited amount during the third to sixth financial year, but this facility is completely blocked on closed accounts. The third disadvantage is that the facility of partial withdrawal available after the seventh financial year is also taken away, which people use for building a house or for children's education. Additionally, under Indian law an individual can maintain only one PPF account in his or her name across the country; In such a situation, unless your old default account is active or mature, you cannot open another new account in any other bank or post office.
The process of reviving inactive PPF account in GPO, Hazratganj, Aliganj or Chowk of the capital of Uttar Pradesh, from main post offices located in Aliganj or Chowk to bank branches in any city or rural area of the country is very simple and transparent. To activate the account, all you need to do is visit the branch of your home bank or post office where the account was originally opened. Go there and take the account revival form from the counter or write an application on a plain paper in the name of the branch manager. According to the rules, you will have to pay a minimum outstanding of Rs 500 per year for all the years in which you have not deposited the money, along with a penalty of Rs 50 per year. For example, if your account has been closed for 5 consecutive years, the minimum outstanding for 5 years becomes Rs 2,500 and a penalty of Rs 250 is charged at the rate of Rs 50 per annum. Along with this, you will have to add a minimum contribution of Rs 500 for the current financial year, that is, after filling and depositing a lump sum slip of only Rs 3,250, your closed account becomes fully active again within twenty-four to forty-eight hours.
There are many account holders who do not want to reopen the account by paying penalty and just want to know what will happen to their money after 15 years. Under the clear rules of the Post Office, even if you do not revive your default account till the entire period of 15 years has passed, you can still withdraw your entire principal amount and the entire interest accrued on it over so many years in a lump sum on the date of maturity. The bank or post office does not deduct any additional compensation from you for this. However, there is a big catch in this that if your account is in default, then after completion of 15 years, you cannot extend it further i.e. in the next 5-5 year block. The right to extend the maturity of PPF is available only to those account holders whose account is completely active and regular at the time of maturity, therefore, to enjoy tax-free interest for a long time in future, activating the account by paying the penalty in time is considered to be the wisest financial step.