Pubic Provident Fund (PPF) is a popular instrument for investing money and saving tax. As of now, this long-term investment provides a rate of interest of 7.1 per cent per annum compounded annually.
One can open a PPF account with the bank or the post office. Almost all large banks offer PPF account facilities.
As this is a secured investment for the long term, in case of the subscriber’s death during the term, the account has to be closed. Neither the nominee/s nor the legal heir/s will be allowed to continue deposits in the account.
But what happens to the amount in the subscriber’s PPF account?
Says Umashankar. U, chartered accountant, Bhutoria Ganeshan & Co., “In case of death of the PPF accountholder, the account will be closed and cannot be continued by anyone, let it be a nominee or the legal heir. PPF account continues to earn interest as per the terms even after the death of the accountholder until the amount is claimed.”
In this case, the nominee or the legal heir of the subscriber can claim the PPF amount.
In Case Of Nominee
The post office or the banks suggest including the nominee details to the account at the time of opening the account, and if the nominee exists in the account, the nominee/s has to fill Form G along with the documents (death certificate, passbook of the subscriber) with the banks or post office where the subscriber maintained the account to claim the amount.
No Nominee In The Account
If there is no nomination in the account, the legal heir of the accountholder/subscriber can claim the PPF amount by producing certain documents, which include a succession certificate, death certificate, passbook of the subscriber, and Form G.
In case of no nomination, if the PPF account balance is not more than Rs 1 lakh, the legal heir can claim the amount without producing a succession certificate, but with the other affidavits (letter of indemnity, an affidavit on stamp paper, a letter of disclaimer on affidavit on stamp paper, death certificate, passbook of the subscriber, and Form G) required.
Points To Keep In Mind: A subscriber need not pay any charge for registering, cancelling, or changing the nomination in the account.
The PPF account is not transferable from one person to another. So, in case of death, the nominee cannot continue the account in his/her own name. The nominee can, however, ‘open a new account’ in his/her own name and deposit the amount so received.
PPF is a tax-free instrument, so, the amount received is not taxable for the recipient. The balance in the PPF account keeps earning interest until the claim for withdrawal is made, and the interest is applicable till the month prior to when the payment is made to the nominee or the legal heir.
Umashankar adds, “The additional amount deposited in a PPF account after the death of the account holder will not attract any interest. It will be returned as it is, to the nominee or the legal heir. Also, there is no tax liability to the nominee as the principal, interest and maturity amount are all tax-free.”
If there is any existing loan against PPF, the nominee or the legal heir is liable to pay the interest on the loan if not already paid by the deceased subscriber.
