PPF, Public Provident Fund – Basics, PPF Account Opening, Interest Rate, Withdrawal & Tax Benefits

The government regularly introduces several welfare schemes for the benefit of its citizens. One of the most popular schemes that focus on encouraging people to save is the Public Provident Fund or PPF Scheme. Introduced in 1968, PPF is a long-term investment option for individuals with a low-risk appetite as both the money in the PPF account and the returns it generates are guaranteed. A PPF account can be opened either in a bank or in a post office where both online and offline modes are available. The PPF account is initially opened for 15 years and can be extended in blocks of 5 years. The minimum and maximum deposits allowed in a financial year are Rs 500 and Rs 1,50,000 respectively. PPF investors can claim up to Rs 1, 50,000 under Section 80C as tax exemption for the PPF investment.

Features of PPF

As the PPF was introduced as a small savings scheme to benefit small investors, there are many features that the investors can benefit from. Since the PPF scheme comes under the Exempt-Exempt-Exempt (EEE) category of tax policy, the principal amount, the maturity amount, as well as the PPF interest earned is exempt from taxes. An investor can check his maturity amount via a PPF account calculator available on many online platforms.

Here are some of the key features of a PPF Account:

• Tenure: A PPF account is originally opened for 15 years. However, account holders can extend the tenure in blocks of 5 years at their discretion.
• Deposit Limit: An investor can deposit a minimum of Rs 500 and a maximum of Rs 1,50,000 in a financial year. Deposits into a PPF account have to be made at least once every year for 15 years.
• Mode of Deposit: Investments can be made in a lump sum or a maximum of 12 installments. The deposit into a PPF account can be made either by way of cash, cheque, demand draft (DD), or through an online fund transfer.
• Associated Risk: This scheme is a government-backed scheme that offers complete capital protection as well as guaranteed, risk-free returns.

Who Can Open a PPF Account?

There are certain rules for opening a PPF account.

• Only resident Indians can open a PPF account.
• NRIs are not allowed to open a PPF account. However, if a resident Indian becomes an NRI post account opening, he can continue to hold the PPF account until maturity.
• An individual can hold only one PPF account, either in a bank or post office.
• Opening joint accounts and multiple accounts is not allowed.
• Parents/guardians can also open PPF accounts for their minor children.

How to open a PPF Account?

An investor can open a PPF account either in a bank on in a post office. PPF account opening is quite simple and requires basic documentation. For the online process, an individual needs to log in to his bank’s net banking portal and select a PPF account (which may appear under the Saving Schemes Tab). Input details such as bank account information, the amount you want to deposit, mode of payment (installment or lump sum), nomination, etc. Your PPF account will be created once the preceding steps are completed.

In the offline process, you need to visit your bank or post office, fill out the PPF account opening form with relevant details and attach requisite KYC documents. An account number would be generated and a passbook will be issued.

The PPF account can be transferred from the bank to the post office or vice versa. It can also be transferred between different branches of the same bank. Also, a PPF account cannot be closed before maturity. It can be closed only upon the account holder’s demise. In that case, the nominee can file for account closure and the proceeds are paid to the nominee.