PPF Deposit Limits in India: Understanding the Rules for 2020-21

The Public Provident Fund (PPF) scheme in India is a popular choice for individuals to save and invest. One of the key features of PPF is its annual deposit limit, which has remained unchanged at 1.5 lakhs (Rs. 1,50,000) for the financial year 2020-21.

Understanding the Deposit Limit

The deposit limit for PPF is a ceiling on the amount an individual can invest in a single financial year. As of 2020-21, the limit for PPF deposits was still set at 1.50 lakhs per financial year. The extension of the deposit limit for the financial year 2019-20 until June 30, 2020, allowed individuals to make additional contributions to their PPF accounts beyond the usual March 31 deadline, but the overall annual limit for deposits remained the same.

Combined Financial Years and Limits

It is important to note that even though the immediate previous financial year (2019-20) had an extended deadline, the maximum amount you could deposit in the PPF account for the year 2020-21 remained 1.5 lakhs. However, for combined financial years (19-20-21), the limit cannot cross 3 lakhs (Rs. 3,00,000) in total.

System Check for Combined Deposits

The system in place for PPF accounts ensures that deposits are checked against the total limit for the combined financial years. If you exceed the 3 lakhs limit across multiple years, the excess amount will not earn any interest and you will not get tax exemption under the Income Tax Act.

Minimum and Maximum Deposit Amounts

While there is a limit to the amount you can deposit in a single financial year, there is no minimum deposit requirement. You can deposit any amount, as long as it is a multiple of 50 rupees. However, any amount deposited above Rs. 1.50 lakh will not earn any interest and the tax exemption benefits will not be available for that amount.

Below is a brief summary of the deposit rules in PPF:

Minimum deposit: Rs. 500 Maximum deposit: Rs. 1,50,000 Deposit must be in multiples of Rs. 50 Can deposit lump sum or multiple instalments Maximum number of instalments in a year is exempted from further details

Earnings and Tax Efficiency

Investments in PPF earn tax-free interest, and the amount invested is eligible for deduction under Section 80C of the Income Tax Act. The 1.5 lakh limit applies to both lump sum and installment deposits, making it a flexible option for investors looking to plan their financial savings and investment goals.

Comparing with Other PF Schemes

It is noteworthy that other provident fund schemes like the Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF) have different deposit limits. For instance, in EPF, you can deposit more than 1.5 lakhs in a financial year, while VPF allows for even higher contributions.

Investigation and Conclusion

A specific query was raised regarding whether the limit of 1.5 lakhs could be exceeded, as there was no limit increase due to the ongoing corona situation. The clarifications provided by the system and banks like SBI confirm that any deposits above 1.5 lakhs are invalid, and the individual must follow the rules strictly. The quantum of 3 lakhs is to be deposited in a single lump sum by June 30, 2020, with a declaration stating the deposit for the year 2019-20, and the remaining deposits for 2020-21 must be made accordingly.

For further details on the Public Provident Fund, refer to our comprehensive article on Understanding Public Provident Fund (PPF).

In conclusion, the PPF deposit limit for the financial year 2020-21 remains at 1.5 lakhs, subject to the overall combined limit of 3 lakhs across three years. Understanding and adhering to these rules is essential for maximizing the benefits of your PPF investments.