The finance ministry is considering a proposal to raise the minimum lock-in period for withdrawal from a PPF (Public Provident Fund) account from six to eight years, to attract longer term funds for infrastructure development.
“Infrastructure funding is the focus area for the Budget. PPF is a long-term investment and the idea of increasing the lock-in is to have more scope to channelise funds into infrastructure,” a source said..
The government would present its Budget for 2015-16 on February 28.
“There are two proposals on the table: Increasing the lock-in period by at least two years to eight years and raising the time limit for maturity of investment from 15 years,” the source added.
Currently investment of up to Rs 1.50 lakh in PPF is exempt from the Income Tax Act under 80C. This was raised from Rs 1 lakh in the Budget for 2014-15. The interest rate on a PPF account is revised at the beginning of financial year, in April, and currently stands at 8.7 per cent. The minimum annual investment is Rs 500 and maximum is Rs 1.5 lakh.
Under the present norms, an individual can withdraw money from his/her PPF account only at the end of the sixth year. The maximum amount of withdrawal from PPF account is 50 per cent of the amount retained in the account in the end of fourth year. This amount can be used for any emergency purpose or for higher studies.
After the completion of 15 years, the investor has the option of withdrawing the fund or extend the lock-in period by five more years.
India targets double its investments in infrastructure to USD 1 trillion during the 11th Five Year Plan that began in April 2012.