The Buyt Desk
Investment products such as Provident fund, Sukanya Samridhi Yojna and National Pension Scheme(NPS) are options that help investors grow their money and save tax.
All these investment products come with multiple payment options, monthly, quarterly and annual. However, sometimes some investors find it difficult to pay installments regularly. Missing the deadline can end up in an inactive account. During COVID times lots of people were in financial stress and could not fulfil the payment commitment.
If your account has become inactive because of missed payments, don’t worry! Most instruments give their investors another chance provided you know their revival process.
Public Provident Fund:- In the provident fund, an investor has to make a minimum contribution of Rs 500 in a fiscal year, i.e. March 31st.
The account turns inactive if the contribution is not made during that period. Further, the account holder is not allowed to withdraw partial money from that account until the account is resumed.
You can activate that account by contributing Rs 500 in it for a fiscal year and Rs 50 as a penalty. You get 7.1% interest on the PPF amount, and the entire amount is tax-free.
National Pension Scheme – National pension scheme is another popular investment scheme. The NPS Tier I account also has a minimum contribution limit of Rs 1000 in a financial year.
In the condition of missed contribution, the account becomes inactive. To activate the NPS account, an investor has to contribute Rs 1000 for the number of years payment has been missed, along with the penalty charge of Rs 100 per year.
NPS also calls for the point-of-presence charge. The condition for the NPS tier II account is also the same. If the tier I account is frozen, the Tier II account will be frozen automatically.
What is NPS?
It is a voluntary pension fund regulated by the Development Authority of India and Pension fund regulatory. The minimum contribution in this fund is 6,000 every financial year. It is an annuity plan and gives a return between 9% to 11% based on the duration of investment.
Sukanya Samriddhi Yojana (SSY)
This investment option calls for a deposit of Rs 250 every year to keep the account active. The SSY account turns inactive or frozen in case of the missed minimum payment.
However, the plan gives the facility of reactivation any time before the lock-in period from the date of its activation.
To reactivate this account, one has to deposit a minimum of Rs 250, along with the penalty of Rs 50 for each defaulted year.
The interest rate of the plan is 7.6% which gets compounded annually.
Bank Recurring Deposit
The recurring deposit is one of the safest investment options for individuals with a low-risk appetite. To keep the account active, one has to deposit the amount every month. In case you miss the monthly payment the account gets inactive.
One can reactivate an inactive account by paying the due installments. In case of three or more consecutive missed instalments, the individual has to pay the service charge, i.e. Rs 10 and penalty charges, which is Rs 1.5/Rs 100 per month for an account opened for the tenure of five years. And, it is Rs 2/Rs 100 per month.
In the case of six consecutive defaults, the respective body where the account is running closes the recurring account prematurely and pays the balance to the account holder.
Life Insurance Policy – The policy becomes inactive in case of one missed premium payment. The policyholder gets a grace period of 15-30 days with no cover.
The insurer can reactivate the account within two years from the date of discontinuation. It is applicable for all three plans that come under, i.e. endowment, term insurance and unit-linked.
For endowment policy renewal, the policyholder has to pay all due premiums along with late payment, interest, due premium and penalty charges. Along with that, the policyholder has to submit documents of proof for missed payment if asked.
The term insurance policy can be revived by paying the late fee, along with the due premiums.
If the policy gets inactive because of missed premium payment before the lock-in period, it can be revived within two consecutive years of lapse. Individuals can also choose to close the policy and get a refund. There is a different set of rules for the same.
