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Public Provident Fund

What is PPF?

Public Provident Fund scheme is a long term investment scheme floated by the Government of India. PPF has been introduced for salaried as well as for self employed people to encourage savings habit and provide tax benefits. As compared to other small savings schemes introduced by government and by non- government institutions, The balance in the PPF account cannot be attached by any order or decree of court in respect of any debt or liability incurred by the subscriber.

Investor can invest as minimum as Rs. 500 to maximum Rs. 1,00,000 in the PPF account in one complete financial year in one lump sum subscription or in maximum 12 transactions. Tenure of PPF scheme is 15 years and premature closure of account is not allowed. After 15 years investor can completely withdraw the accumulated balance (Principal + Interest) and close the account or if investor desires to extend his PPF account, extension can be taken in a block period of 5 years for any number of times. As per PPF scheme terms and conditions prescribed by Government, an investor can avail of loan and withdrawal facility.

What are the tax benefits?

Public Provident Fund scheme stands out in terms of benefits offered. This is because investment in PPF scheme falls under triple E (Exemption) regimen i.e. Principal, Interest and outflow all are tax exempted. This means that you get tax benefits from investing your money and also the interest and maturity payments are tax exempt.

What are the interest rates?

The PPF interest rate has steadily dropped over the years, and can be expected to slowly fall as the years proceed though there has been a upswing in the last 2 years.Here’s a look at what rates used to be in the hey-days of the PPF account:

Period Interest Rate p.a.

01 April 1986 – 14 Jan 2000 12.00%

15 Jan 2000 – 28 Feb 2001  11.00%

01 March 2001 – 28 Feb 2002  9.50%

01 March 2002 – 28 Feb 2003  9.00%

01 March 2003 – 30 Nov 2011  8.00%

01 Dec 2011 – 31 March 2012  8.60%

01 April 2012 till date  8.80%

What is an unpresented cheque or check and does it require an adjustment to the balance sheet?

Unpresented Cheque is defined as a check that was written but has not yet been paid by the bank on which it is drawn. An unpresented check is also referred to as an outstanding check or a check that has not yet cleared the bank. Outstanding checks are deducted from the balance per the bank in order to arrive at the adjusted or corrected balance per bank.

When a check is written, it will be recorded as a credit to the Cash account in the company’s general ledger. Whether the check clears the bank or not, the company’s Cash account balance is proper. The Cash account balance will be presented on the balance sheet without any adjustment for unpresented or outstanding checks.