PPF rules don’t allow investors to open, operate two accounts

In the first week of April, my bank didn’t accept my Public Provident Fund (PPF) contribution as they noticed its tenure had not been extended (beyond 20 years) and advised that the account be closed and the balance withdrawn. I opened a new PPF account in another bank and contributed ₹1.5 lakh. Later, when I visited my first bank to withdraw, they told me that the term can be extended and they did it. Now I have two PPF accounts. Can I continue with two accounts while ensuring I don’t exceed the annual limit of ₹1.5 lakh?

—Asif Khan

PPF regulations do not permit any investor to open and operate more than one account. In case anyone does open a second account, the second account is treated as invalid. However, you can get the second account merged with the first account provided you are able to prove that the second account opened was not deliberate. For that, you need to file an application with the Department of Economic Affairs of the ministry of finance. If the second account has interest credited, that will get adjusted and if the total contribution during the year crosses the limit of ₹1.5 lakh in both the accounts collectively, the excess amount will be refunded without interest.

Also Read | Digital bank account sparks off a disruption

Should I invest in the National Pension System (NPS) or mutual funds in terms of returns? NPS will help me save tax but mutual funds are likely to give higher returns.

—Meenal

NPS and mutual funds are different structures. NPS offers you tax advantage at the time of investing and is a long-term vehicle but caps your exposure in equity to 50-75%. Here, mutual funds score high as subject to your risk profile, higher equity exposure can be taken. Mutual funds also offer you liquidity, helping you to plan and manage cash flows better. NPS, on the other hand, can be a good tool to plan your retirement.

For a portfolio structure which is meant for long term with low to moderate risk and higher tax-efficiency, an investor can opt for NPS. For portfolios where higher risk is to be taken, or liquidity is to be planned for emergency corpus as well as to provide for other short- or medium-term goals, mutual funds should be the go-to investment strategy.

Surya Bhatia is managing partner of Asset Managers