a PPF The account is one of the most tax friendly instruments for long term savings as interest and maturity income is exempt from tax. Tax exemption is also available on this under section 80C. Apart from these benefits, a PPF account holder can also avail Loan On the basis of PPF balance with him Credit.

eligibility

Loan can be taken from the third to the sixth financial year of the account. If the account was opened in 2020-21, then the loan can be taken till 2022-23. It will be a short-term loan for 36 months and will have to be repaid by then.

Interest

The interest rate applicable on the loan is at least 1% p.a. if the amount is repaid before the end of 36 months. However, if the amount is repaid after 36 months, interest is charged at the rate of 6% per annum from the date of disbursement.

loan amount
The maximum loan amount that can be availed is 25% of the balance in the PPF account at the end of the second year immediately preceding the year in which the loan is being applied for. For example, if the account holder is applying for a loan in 2022-23, then 25% of the PPF account balance as on 31st March 2021 will be applicable as the maximum loan amount.

Form

To apply for a loan against PPF account by the account holder, Form D has to be filled and signed by the account holder specifying the account number and amount of loan applied for. The PPF account passbook should be attached with the form and submitted to the bank/postal authority where the PPF account is held.

things to note

• Only one loan can be taken in a particular financial year.
• If the first loan is not repaid then the second loan cannot be granted.

(Content on this page is for Courtesy Center Investment Education and Education (CIEL). Contributions by Girija Gadre, Aarti Bhargava and Labh Mehta.)