I opened a Public Provident Fund (PPF) account on 19 March 1998. After 15 years, I extended it for five years on 23 November 2013. I have been depositing money all these years and claiming Section 80C benefits. It was due for extension in 2018-19, but my deposit on 28 May 2018 was accepted. What do I do now? Shall I give form H now? What are the implications?

—R. Kesavan

Your PPF account opened on 19 March 1998 was due for maturity on 1 April 2013. The same was extended with contribution for a block of five years and was due for maturity on 1 April 2018. Now you have further extended the same by depositing a fresh contribution on 28 May 2018. However, you have not submitted the application, form H, for further extension. The extension form needs to be submitted within one year from the date of maturity—so you need to submit the same by 31 March 2019.

Deposit the same with your post office or bank as non-deposit of this form will be considered as “account extended without further contribution" and this will not let you earn any interest on the fresh deposit. Also, in this case, the deposit will not be eligible for deduction under Section 80C of the Income Tax Act.

I had bought a house in 2011, and have been paying EMI in the range of 16,000-18,000 since then. I got possession last year, and have put it on rent ( 7,000 a month). The purpose is to invest the rental income for my son’s higher education, which will be needed some 10 years from now. If the sum required is high, we would be willing to sell the house and use the proceeds. However, after having read many articles that said returns from real estate are poor, we want to sell the house now and invest that money. Please advise.

—Venky

The house you have bought is prima facie an investment asset. And if that’s the case, then you need to look at it without any biases and evaluate independently whether it is a good asset class to hold and what are the expected returns versus any other asset class. As you have leveraged the property and taken a housing loan, your earnings rate needs to be calculated a little differently. The growth of the asset along with the rental yield combined together should be able to yield a return of cost of borrowing plus bank fixed deposit (FD) rate to give you a net return of bank FDs. This in today’s time is not an easy task. In number terms, you need to earn a return of 8.5% (assumed cost of housing loan) to break even. And to generate a Bank deposit rate you need to earn 8.5%+7% or 15.5%. Of course this is not to be seen for the next one year of performance but over the next 3-5 years and in your case it could be even longer. So if you believe that the real estate will do well over the next few years you can hold the same else you need to liquidate the asset and reinvest in a higher yielding asset class.

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Surya Bhatia is managing partner of Asset Managers

Queries and views at mintmoney@livemint.com

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