When it comes to debt instruments or debt investments, Public Provident Fund (PPF) is the most preferred option to bet for long-term investors. It is among the most prominent small savings scheme of post office, with one of the highest interest rates in its sector as well as a longer maturity period of 15 years. The present interest rate on a PPF savings account is 7.1 per cent, which is compounded on an annual basis, and it is set by the government on a quarterly basis.
A PPF account allows an individual to deposit up to Rs 1.5 lakh per year and an initial deposit of Rs 500. PPFs are classified as EEE (Exempt, exempt, exempt), which implies that the deposit amount interest earned, and maturity amount are all tax-free, which makes it more appealing to debt-oriented investors. Apart from all the discussed perks, a PPF account can be inactive if you do not follow certain rules. So let's start discussing in brief that why a PPF account becomes inactive and how to reactivate it.
1. If you don't deposit the mandatory amount of Rs 500 every financial year, your PPF account will be classified as "inactive."
2. To keep a PPF account active, it is recommended that you deposit Rs 500 by March 31 of each financial year cycle.
3. Withdrawal and loan facilities will be unavailable to depositors with inactive or dormant accounts.
4. In the event that a PPF account is inactive, the overall deposit for the year must include deposits made in prior financial years' default years.
5. PPF accounts that have been inactive cannot be extended. However, after reactivating a PPF account, a depositor can continue to make deposits and make one withdrawal every fiscal year, up to a maximum of 60% of the amount at the time of maturity in a 5-year block.
6. A discontinued account can be reopened during its maturity period with a penalty of fifty rupees plus arrears of five hundred rupees in minimum contribution for each year of delinquency.
7. The outstanding or remaining balance in a discontinued account that is not revived by the depositor before the account's maturity date continues to earn interest at the scheme's prevailing rate.
8. A discontinued account holder will not be allowed to open a new account until the discontinued account has been closed upon maturity.
9. To activate an inactive PPF account, the responsible account holder will have to submit a written application to the concerned bank or post office.
10. The application for reactivating a PPF account must be submitted at any time throughout the account's or scheme's 15-year tenure.