The Public Provident Fund (PPF) account is not just a long-term investment tool. During any kind of financial crisis an account holder can take loan from one’s Public Provident Fund Account against the PPF balance accumulated during the investment period. As per the tax and investment experts, borrowing loan from PPF is much cheaper than other retail bank loans like personal loan, gold loan, loan against Fixed Deposit, etc. They said that loan against PPF balance is available at 1 per cent interest rate. So, if you are facing money crisis during Coronavirus lockdown, then loan against PPF balance can be a better option.
Comparing the loan against PPF balance with other retail bank loans available in the lending market; Manikaran Singhal, a SEBI registered tax and investment expert said, “Loan against PPF balance is definitely much cheaper than other retail loans such as personal loan, gold loan or loan against fixed deposit (FD), but one needs to know that loan from PPF account is subject to your deposit while loan from retail banking options are subject to your monthly income. So, much depends upon the amount you need during financial crisis. If the amount you need can be availed through PPF account loan, then one should go for it.”
Speaking on the loan against PPF balance; Mumbai-based tax and investment expert Balwant Jain said, “Loan against PPF balance becomes available from third year of the PPF account. However, it’s available from third year to sixth year only. Once your PPF account becomes six year old, you can go for the PPF withdrawal.”
Standing in sync with Balwant Jain; Singhal added that loan from PPF account could be taken from the third year onward till the sixth year. Let’s suppose you opened your PPF account in December 2017 (in the FY 2017-18), you can avail a loan only in FY 2017-2018 (2017+2 = 2019) till FY 2022-2023 (2017+5=2022).
You can avail a loan amount of up to a maximum of 25 per cent of the balance in your account at the end of the second year immediately preceding the year in which the loan is applied for.
If you apply for a loan in November 2019 (FY 2018-2019), you would get 25 per cent of the amount that existed at the end of March 2019.