Public provident fund (PPF) is among the most popular investment options for long-term savings. Deposits made under PPF also qualify for tax benefits. PPF subscribers can also avail loan benefits against their deposits.
10 Things to Know About the Loan Facility
1) A PPF subscriber can avail loan between the third and sixth financial year of opening the account. For example, if the account was opened in the 2011-12, a subscriber can take a loan between 2014-15 and 2017-18. PPF accounts follow an April-March year cycle.
2) The amount is restricted to 25 per cent of the balance at the end of the second year preceding the year in which the loan is applied for. For example, if the loan was applied in 2015-16, 25 per cent of the account balance at the end of 2013-14 can be taken as loan.
3) However, no loan can be taken from the seventh year of opening the PPF account, as it qualifies for partial withdrawal.
4) The loan (principal) is repayable either in lump sum or in installments within 36 months.
5) The interest portion of the loan has to be repaid by two monthly installments after the principal is paid off.
6) Interest is charged at 2 per cent more than a subscriber receives on the PPF.
7) Meanwhile, the balance amount in the PPF account accumulates interest.
8) If the loan is not repaid within 36 months, interest at 6 per cent more than what subscribers receive on their deposits is charged.
9) The interest on outstanding loan which has not been paid before 36 months or paid partly will be debited from the subscriber's account at the end of each financial year.
10) A second loan can be taken on full payment of first loan.
Disclaimer: "Investors are advised to make their own assessment before acting on the information."
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