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Q&A

PPF extension

I have a PPF account in the State Bank of India, opened on April 22, 1999, which will mature on April 22, 2014. I wanted to submit an application to extend this account but the bank manager told me to submit the same after April 22, 2015. Please tell me whether he is correct and whether I’ll be able to deposit money in this account after April 2014 for financial year 2014-15 without getting an extension.
Dilip Kumar Kundu, via email
 
account holder can extend the PPF account after the maturity period of 15 years either without putting in any money or by making a contribution. In case the account holder makes no contribution to the account for one year after maturity, the account will automatically be extended without contribution. Interest would, however, accrue to the balance amount. In case the account holder wants to invest on a regular basis, this has to be notified to the bank within one year of the maturity.
 
 
 
Fixed or recurring
I plan to deposit a sum of Rs 24,000 in either a bank fixed deposit or a recurring deposit. But it has come to my notice that if I put the money in a fixed deposit, the return is more. Please suggest what to opt for and also the tax liability.
B. Mitra, Calcutta
 
sider a rate of interest on both fixed deposit and recurring deposit at 8.75 per cent per annum. Assuming that your investment period is one year, the total maturity amount in the case of fixed deposit is Rs 26,170 and in the case of recurring deposit (assuming you are depositing Rs 2,000 per month) Rs 25,161. So, there is a difference of Rs 1,009 in favour of the fixed deposit. This is because in the case of fixed deposit, you are investing a lumpsum amount that earns interest for one year while in the case of recurring deposit, the first instalment earns interest for 12 months, the second for 11 months, the third for 10 months and so on. Whether you should invest in a fixed or recurring deposit will depend on whether you are willing to deposit all the money at one go or in a monthly period which leaves more cash at hand that can be utilised for other purposes. On tax deduction, in the case of FD, the bank will deduct TDS if the interest income is more than Rs 10,000 a year. But, there is no TDS on recurring deposit.
 
 
 
If you have any queries about investing or taxes or a high-cost purchase you are planning, mail to: btgraph@abp.in, or write to: Business Telegraph, 6 Prafulla Sarkar Street, Calcutta 700 001.
 
 
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