Public provident fund (PPF) is one of the most favoured small saving schemes as it provides assured return and is also tax efficient. PPF falls under the exempt, exempt and exempt category where the investments, the returns as well as the accumulations are all tax free.
“Even if you are not availing Section 80C tax deduction on the investments, interest earned and compounding of it helps investor accumulate a good corpus in the long term,” says Jitendra Solanki, a Ghaziabad-based Sebi registered investment advisor.
However, an individual is allowed to open only one PPF account as per the law. Either of the parents can open one account in the name of their minor child. There is a cap of ₹1.5 lakh on the investments; one can make in the two accounts including that of a minor’s account.
Even grandparents can’t open a PPF account for their grandchildren if either of the parents are alive.
But in case you changed jobs and shifted to a different city and instead of closing the existing account or getting it transferred, you opened another account, you will not earn the interest on the second account.
“PPF rules are very clear that one can’t open more than one account if someone still opens a second account, he or she will not be eligible for any interest on invested amount,” said Rajan Pathak, Mumbai-based independent financial advisor.
“The second account will have to be closed down. The person can approach the respective bank branch or post office and ask them to close the account,” said a senior official from National Small Savings Institute.
Any interest if credited on the second account will have to be given back to the government.
“The cases of people opening a second PPF account are very few as they have to sign a declaration in the PPF account opening form that they don’t have any other existing PPF account,” said the senior official.
However, ignoring that if one opens a PPF account then the second account will not get any of the benefits of a PPF account. However, there are no penalties on opening a second account.
Cases where the person was ignorant and can prove that the second account opened was a mistake, he/she can appeal to the Ministry of Finance to merge the two accounts.
“The person will have to first prove it to the bank or post office branch that the second account opened was a genuine mistake then only the person can appeal to the Ministry of Finance, which will decide on it on a case to case basis whether to merge the two accounts or not,” said the official.
It is always advisable to transfer your PPF account in case you are not using online banking facility. One can open a PPF account in post office as well as designated commercial banks. You can transfer your PPF account from post office to bank or bank to post office or within different bank branches.