Friday, November 14, 2014

Can You Invest more than one lakh in PPF Account?

TL;DR: You can now invest more than 1 lakh rupees on your PPF account, thanks to increased limit in 2014 budget. Earlier this limit was only 1 lakh but now it is raised to 1.5 lakh and so without doing any extra trick, as shown in this article, you can now invest more than one lakh in your personal public provident fund account.


I wrote this post couple of months ago but couldn't able to post. I know things have been changed from them to now and that's why I have added an opening paragraph with the latest information, I thought to share how it was before because it still possible that people will ask questions like, Can we invest more than 1.5 lakh in PPF account :-).



Can I invest more than 1.5 lakh in PPF account?

One of the most common question PPF investor in India asks is, Can I invest more than one lakh in PPF account? Well, the answer was No couple of month back, but now this limit is increased to more than 1 lakh, precisely 1.5 lakh. By the way, you can not invest more than 1 lakh in your PPF account, if you do and they find out, the amount in excess of 1,000,000 will not earn any interest or tax benefit. So it makes no sense to deposit more than 1.5 lakh in your PPF account.



By the way, PPF limit is raised in budget 2014 up to 1.5 lakh, which means you can not invest more than one lakh in your PPF account. I know, now the question will change as Can I invest more than 1.5 lakh in PPF :) So rest of discussion in this post will treat this as the maximum limit in PPF.

Now some people go one more step and ask, can a father deposit amount in wife or son's account to take the total more than 1 lakh? Well, though you can also open an additional PPF account on behalf of a minor e.g. your son or daughter and you can subscribe any amount in multiples of Rs. 5/- of not less than Rs.500/- and not more than Rs.1,00,000/- in a year in each of his account.


A year for the purpose of the Scheme means a financial year (1st April to 31st March). The deposits in excess of Rs. 1,00,000 made during a year will not carry any interest and will not be eligible for the rebate.

Another important thing to consider is a tax benefit,  AFAIK, one can deposit up to 1 lakh in each PPF account and earn tax-free interest but benefit under section 80C is available up to 1 lakh only.


In short,

1) You can only deposit up to 1 lakh in your PPF account, any additional investment will not accrue any interest or tax benefit.

2) If you are the guardian of any PPF account opened in the name of minor, e.g. son or daughter, you can deposit another 1 lakh in that amount. This amount will earn both interest and tax benefit.


3) Remember, under section 80C earlier limit was just 1 lakh, so even you can invest more than 1 lakh using two PPF account, you can only claim up to 1 lakh under section 80C. In 2014 budget, this limit is raised up to 1.5 lakh. So this is the first time you can try to claim more than 1 lakh as tax benefit as per your PPF investment.

Can I invest more than 1.5 lakh in PPF account

PPF is  a very good long-term investment option, even better than the fixed deposit, but you must know what you can do and what you cannot with PPF. If you are new to the finance world and want to learn more about PPF, please see my article 10 things you should know about PPF.

2 comments:

  1. Yes, from the year 2014, post budget, the maximum amount you can invest in single PPF account is raised from 1 lac to 1.5 lac, so obviously it answer the question in positive.

    ReplyDelete
  2. Don't invest more than 1.5 lac in Public Provident fund because extra money will not fetch any interest and basically its free loan to the government, instead put that money on stocks or mutual fund and after 20 years you will more rewarded.

    ReplyDelete

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