PPF: The all-weather investment option (From the Times of Money Website) How much can I put in a PPF account? PPF gives you the flexibility to put in a different amount every year. You can invest as little as Rs 500 in a year when you are really cash strapped. You can invest up to Rs 70,000 a year. You may contribute to the PPF account opened in your children's names and claim the rebate yourself. But the total sum that you are thus collectively investing cannot exceed Rs 70,000, according to a notification (in October 2002). You may invest in one lump sum a year, or in small installments, up to 12 in a year. Unlike any other small savings plan, the date of handing over the cheque is taken for crediting your account and not the day it is cleared. So even if you wake up on the last day of a financial year, you can rush to the bank and deposit a cheque into your PPF account. What if I fail to pay even Rs 500 in a financial year? Well, your account will be discontinued. But don't lose heart. The default can be remedied on payment of a small fine along with arrears. And if your account is in default, and you don't want to reactivate it for some reason, you can open another account. The interest will continue to accrue in a default account, and will be paid at the end of 15 years. But you can't withdraw before that or take a loan. How is interest on PPF account calculated? The 8 percent interest is calculated on the lowest balance between the close of the fifth day and the last day of every month. It is credited to the account at the end of each financial year i.e. on 31st March. It is tax-free. How can I take a loan in a PPF account? A loan repayable in 36 months can be obtained in or after the 3rd year, up to 25 percent of the balance at the end of the preceding financial year. You will pay one percent over what you get, i.e., nine percent on the loan for the first 36 months. If the loan is not repaid within 36 months, the rate goes up to six percent over the PPF rate, i.e. 14 percent. You can take a second loan before the end of the 6th financial year, after repaying the first one. Can I keep a PPF account for longer than 15 years? Yes, you can. You don't have to close it at the end of 15 years. You can continue it further for an indefinite period in blocks of five years. You may or may not contribute during this extension period. How does nomination work? The nominee can claim the dues, on demand. Where there is no nomination in force, the balance will be paid to the legal heirs on production of succession certificate/probate. If the balance is less than Rs 1 lakh, the legal heir can claim it by producing a letter of indemnity, an affidavit, a letter of disclaimer, and the death certificate of account holder.