PPF: This one mistake could lead to your PPF account being closed; find out how to reactivate it if it becomes inactive..

The Public Provident Fund (PPF) remains one of the most popular investment options today. Several factors make this scheme special. PPF returns are unaffected by stock market fluctuations. Since the scheme is run by the government, it is considered highly reliable. It offers an annual interest rate of 7.1%. Disciplined investing through this scheme allows for the accumulation of a substantial corpus.

**PPF is a highly attractive scheme from a tax perspective**

PPF is among the investment options that offer tax deductions on investments. This deduction is available under Section 80C of the Income Tax Act. Deductions can be claimed on the total investment made in the scheme during a financial year, thereby reducing tax liability. However, this benefit is available only under the old income tax regime; taxpayers opting for the new regime cannot claim deductions for PPF investments.

**Failure to meet the minimum investment requirement leads to account closure**

Many people open PPF accounts but fail to maintain investment discipline. It is mandatory to invest a specified minimum amount in the PPF account during a financial year; this minimum amount is ₹500. If an investor fails to deposit at least ₹500 in a financial year, the account may become inactive or closed. Once the account is closed, no new deposits can be made.

**Several disadvantages of an inactive PPF account**

Experts point out that there are significant downsides to having an inactive PPF account. An investor with an inactive PPF account cannot avail of loans against it, nor can they make withdrawals when needed. Furthermore, an inactive account defeats the objective of building a large corpus over the long term, and the investor misses out on the benefits of compounding. Therefore, making an annual contribution to the PPF account is essential. How to Reactivate the Account

Reactivating an inactive PPF account is not difficult. To do so, the investor must visit the bank where the PPF account is held; if the account was opened at a post office, one must visit that post office instead. An application is required to reactivate the account, followed by the payment of a penalty. A penalty of ₹50 applies for each year of inactivity; for instance, if the account has been inactive for two years, a penalty of ₹100 must be paid.

Tax Benefits Available to Taxpayers Under Both Regimes

Investment advisors consider the PPF a highly beneficial scheme from a tax perspective. Individuals opting for the old income tax regime can claim a deduction on investments made in this scheme. Furthermore, the scheme falls under the 'Exempt-Exempt-Exempt' (EEE) category, meaning that deposits, interest earned, and maturity proceeds are all tax-free. These three benefits are available to taxpayers under both the old and new income tax regimes.

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