Investing in Public Provident Fund - Part III
Nomination One or more nominations can be made by the subscriber to receive the amount standing to his credit in the event of his death. Nomination once made can also be cancelled or varied. If the nominee is a minor, the depositor can appoint any person to receive the amount due during the minority of the nominee. The facility of nomination is also available in case of HUF but not for minors.
In the event of death of subscriber, the amount standing to his credit after making adjustments, if any shall be paid to the nominee or nominees on making an application by them together with proof of death of subscriber. If any nominee is dead, the proof of death of nominee is also required. However, if the balance is not withdrawn, it will continue to earn interest. Fresh contributions and partial withdrawals by nominee are not permitted after the death of the account holder. It is advisable to open a savings account of the nominee or nominees in the same bank and mention this number in the PPF account opening form. Also, since a single cheque is issued in favour of all the nominees, it would be prudent for the nominees to open a joint saving bank account.
Where there is no nomination, the balance after making adjustments shall be paid to the legal heirs on production of succession certificate/probate acquiring which requires lot of time and paperwork. Therefore, to reduce hardships if the balance is up to Rs1 lakh, it will be paid to legal heirs on production of i) a letter of indemnity, ii) an affidavit, iii) a letter of disclaimer and iv) the death certificate. But in practice, if the bank manager is convinced and closely acquainted, he usually pays you the entire sum of money.
Tax treatment The contributions made to the PPF account are eligible for deduction u/s 80C of Income Tax Act. The interest earned and the entire amount received on maturity or premature withdrawal is completely tax-free. Moreover, the balance held in PPF account is fully exempt from wealth tax, without any limit.
Benefits The investment in PPF offers highest security as it is a government-backed scheme. The return of 8% p.a. offered by the scheme actually works out to be higher due to tax benefits and the compounding factor (interest on interest earned). The balance amount in PPF account is not subject to attachment under any order or decree of court in respect of any debt or liability.
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