Here’s why to make minimum investment in NPF, PPF and SSY tax saving schemes before March 31

Tax saving and financial planning should be consistent, but most of us start thinking about this late in the year. However, there are tax saving schemes that require a minimum contribution to keep them active and save on taxes. Some of these schemes are the National Pension Scheme (NPS), Public Provident Fund (PPF) and Sukanya Samriddhi Yojna (SSY).

Here’s a look at the minimum contribution of these schemes and what will happen if they are not made.

This government-backed instrument has a 15-year lock-in period. It is a popular option to save tax under Section 80C due to its EEE tax status (tax exemption at all three stages -- deposit, interest accrual and withdrawal).

Minimum contribution for a PPF account is Rs 500 in a financial year and the last date to make this contribution is March 31, 2022.

In case an individual fails to make the contribution, a penalty of Rs 50 for each year along with an arrear subscription of Rs 500 each year has to be paid.

The PPF account is treated as discontinued if a minimum contribution in not made in a financial year. Such accounts will not be entitled to the facility of obtaining a loan or making partial withdrawals until the account in revised. A discontinued account can be revived till the end of its original maturity date. It can’t be revived after maturity or closed before it.

The subscriber of the PPF account will get back the amount only after the expiry of the maturity period of 15 years along with interest.

NPS is a government-backed low-cost option to save for retirement. There are two types of accounts, Tier-1 NPS account and Tier-2 NPS account.  Minimum contribution for Tier-1 NPS account is Rs 1,000 in a financial year. Tier 2 NPS accounts don’t have minimum contribution requirements.

If an individual fails to make the minimum contribution then the NPS tier 1 account will become dormant. If one also has a Tier 2 account, then along with the Tier 1 account Tier 2 account will also get frozen. To revive the account a penalty of Rs 100 each year along with minimum contributions and Point-of-Presence (POP) charges will need to be paid.

The SSY scheme by the government is eligible under Section 80C with tax status EEE. An SSY account can be opened by parents or guardians of a girl child till she is 10.

Minimum contribution to keep the Sukanya Samriddhi Account active is Rs 250 in a financial year.

If the account holder fails to make the minimum deposit in a financial year, then it will be treated as a defaulted account.

A defaulted account can be revived before the completion of 15 years from the date of opening of the account. A penalty of Rs 50 for each defaulted year along with the minimum contribution needs to be paid.