How do I get a loan against my PPF?

A PPF account is one of the most tax-efficient instruments for long-term savings because the interest and maturity proceeds are tax-free. It also qualifies for a tax deduction under Section 80C. Aside from these advantages, a PPF account holder can also obtain a loan based on the PPF balance to his credit.

Eligibility

From the third to the sixth financial year of the account, a loan can be obtained. If the account was formed between 2020 and 2021, the loan can be taken out between 2022 and 2023. It will be a 36-month short-term loan that must be returned by then.

Interest

If the loan is repaid before the end of the 36-month period, the interest rate is as low as 1 percent each year. If the loan is repaid after 36 months, interest at the rate of 6% per year will be charged from the date of disbursement.

Amount of loan

The maximum loan amount available is 25% of the balance in the PPF account at the end of the 2nd year immediately preceding the year in which the loan is applied for. For example, if the account holder applies for a loan in 2022-23, the maximum loan amount will be 25% of the PPF account balance credit as of 31 March 2021.

Form

To apply for a loan against a PPF account, the account holder must fill out Form D, which must include the account number and the amount of the loan requested, as well as be signed by the account holder. The form must be accompanied by the PPF account passbook, which must be delivered to the bank or post office where the PPF account is held.

Points to note

• In any given financial year, only one loan can be obtained.
• If the first loan has not been repaid, a second loan cannot be given.