Public Provident Fund, Basics, PPF Account Opening, Interest Rate, Withdrawal & Tax Benefits
Features of PPF account
Below are the essential features of PPF
Tenure: The PPF has a minimum tenure of 15 years, which can be extended in blocks of 5 years as per your wish.
Investment limits: PPF allows a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh for each financial year. Investments can be made in a lump sum or in a maximum of 12 instalments.
Opening balance: The account can be opened with just Rs 100 a month. Annual investments above Rs 1.5 lakh will not earn interest and will not be eligible for tax savings.
Deposit frequency: Deposits into a PPF account have to be made at least once every year for 15 years.
Mode of deposit: The deposit into a PPF account can be made either by way of cash, cheque, demand draft (DD) or through an online fund transfer.
Nomination: A PPF account holder can designate a nominee for his account either at the time of opening the account or subsequently.
Joint accounts: A PPF account can be held only in the name of one individual. Opening an account in joint names is not allowed.
Risk factor:
Minimum Contribution
You are required to make a minimum deposit of Rs.500 per financial year to keep the account active. If you fail to make this deposit, the account will be discontinued. You will have to pay a penalty of Rs.50 along with a minimum deposit of Rs.500 to reactivate the account.
An interest rate of 7.1% p.a. (Q4 FY2022-23) is applied to the deposit and is compounded annually.
Any Indian citizen can invest in PPF.
One citizen can have only one PPF account unless the seconf account is in the name of a minor.
How to open a PPF account?
A PPF account can be opened with either a Post Office or with any comercial bank like the State Bank of India or Punjab National Bank, etc.
Required Documents:
Nominee declaration form
Passport size photograph
Process to open a PPF account online:
Step 1: Log into your bank account on the internet banking or mobile banking platform.
Step 2: Select the ‘Open a PPF Account’ option.
Step 3: If the account is for self, click on the ‘Self Account’ option. If you are opening the account on behalf of a minor, select the ‘Minor Account’ option.
Step 4: Enter the relevant details in the application form.
Step 5: Key in the total amount you want to deposit in the account per financial year.
Step 6: Submit the application. An OTP will be sent to the registered mobile number. Enter it in the relevant field.
Step 7: Your PPF account will get created in an instant! Your PPF account number will be displayed on the screen. An email will be sent to your registered email address with all the details confirming the same.
Process to open a PPF account in a post office
Step 1: Get an application form from your nearest post office or online.
Step 2: Fill up the form and submit it with the required KYC documents and a passport-size photograph.
Step 3: Make the initial deposit required to open a post office PPF account. The amount can range from Rs.500 up to Rs.1.5 lakh per financial year.
Step 4: Once your application is processed, a passbook will be given to you for the PPF account opened.
Loan against PPF
You can take a loan against your PPF account between the 3rd and 6th year. The maximum tenure of the loan is three years (36 months).
The loan amount can be a maximum of 25% of the total available amount.
A second loan can be taken before the 6th year if the first loan is repaid fully.
PPF amount withdrawal
As a rule, one can fully withdraw the PPF account balance only upon maturity, i.e. after the completion of 15 years. Upon completion of 15 years, the entire amount standing to the credit of an account holder in the PPF account along with the accrued interest can be withdrawn freely and the account can be closed.
However, if account holders are in need of funds, and wish to withdraw before 15 years, the scheme permits partial withdrawals from year 7 i.e. on completing 6 years.
An account holder can withdraw prematurely, up to a maximum of 50% of the amount that is in the account at the end of the 4th year (preceding the year in which the amount is withdrawn or at the end of the preceding year, whichever is lower). Further, withdrawals can be made only once in a financial year.
Procedure for withdrawal from PPF
In case you wish to partially or completely withdraw the balance lying in your PPF account.
Step 1: Get the application for withdrawal of PPF from the bank/post office (Form 3/Form C) where you have opened the PPF account.
Step 2: Fill in the application form with relevant information.
Step 3: Submit the application to the concerned branch of the bank or post office where your PPF account lies.
PPF Withdrawal Form
An individual must file Form 3/Form C for the withdrawal of the PPF amount. This form has 3 sections:
Section 1: Declaration section where you must give your PPF account number and the amount of money you propose to withdraw. Along with that, you also need to mention how many years have actually passed since the account was first opened.
Section 2: Office use section which comprises details like:
Date when the PPF account was opened
Total balance standing in the PPF account
Date on which the previously requested withdrawal was allowed
Total withdrawal amount available in the account.
The amount of money sanctioned for withdrawal.
Date and signature of the person in charge – usually the service manager.
Section 3: The bank details section asks for the details of the bank where the money is to be credited directly or the bank in whose favour the cheque or the demand draft is to be issued. It is also mandatory to enclose a copy of the PPF passbook along with this application.
Frequently Asked Questions
Is it mandatory to withdraw the PPF account balance at the end of the 15 years?
It is not mandatory for you to withdraw the PPF balance at the end of the maturity period, i.e. 15 years. You can let the money stay in the account so that it accrues interest as long as you close the account.
Can I extend the tenure of the account for 3 years since I may need the sum then?
You can only extend the account tenure in the blocks of five years upon maturity.
How many times am I allowed to extend the tenure in the blocks of five years?
There is no upper limit on the number of times you can extend the tenure of the account as long as you extend it in the blocks of five years. However, you can only extend the tenure upon the maturity of each block.
I don’t think I can continue to contribute to my PPF account anymore. Can I close my account?
Individuals are allowed to close their PPF account only after completing five years. Also, there are certain criteria to be satisfied in order to close the account.
Who can open a PPF account?
Any resident Indian adult can open a PPF account. In the case of a minor or a person with an unsound mind, a legal guardian can open the account on their behalf.
How to withdraw money from a PPF account?
Fill in Form C with relevant details. You can download this from your bank or Post Office website or at the branch.
Submit the form to the bank or Post Office branch where your PPF account is held.
The purpose of the Public Provident Fund (PPF), which was first implemented in India in 1968, was to mobilise small contributions for investment and return. It can also be referred to as an investment vehicle that enables one to accumulate retirement funds while reducing yearly taxes. Anyone looking for a safe investment option to save taxes and earn guaranteed returns may open a PPF account.
Public Provident Fund (PPF) scheme is a long-term investment option that offers an attractive rate of interest and returns on the amount invested. The interest earned and the returns are not taxable under Income Tax. One has to open a PPF account under this scheme and the amount deposited during a year will be claimed under section 80C deductions.
Below are the essential features of PPF
Tenure: The PPF has a minimum tenure of 15 years, which can be extended in blocks of 5 years as per your wish.
Investment limits: PPF allows a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh for each financial year. Investments can be made in a lump sum or in a maximum of 12 instalments.
Opening balance: The account can be opened with just Rs 100 a month. Annual investments above Rs 1.5 lakh will not earn interest and will not be eligible for tax savings.
Deposit frequency: Deposits into a PPF account have to be made at least once every year for 15 years.
Mode of deposit: The deposit into a PPF account can be made either by way of cash, cheque, demand draft (DD) or through an online fund transfer.
Nomination: A PPF account holder can designate a nominee for his account either at the time of opening the account or subsequently.
Joint accounts: A PPF account can be held only in the name of one individual. Opening an account in joint names is not allowed.
Risk factor:
Since PPF is backed by the Indian government, it offers guaranteed, risk-free returns as well as complete capital protection. The element of risk involved in holding a PPF account is minimal. As the returns from PPF accounts are fixed, they are used as a diversification tool for the investor’s portfolio.
Tax benefit:
Tax benefit:
The PPF interest and maturity amount are tax-free under section 80C of the Income Tax Act, 1961.
Partial withdrawal: PPF amount can be withdrawn partially from the seventh financial year onwards.
What is the interest rate on PPF?
The current PPF interest rate is 7.1% p.a. that is compounded annually.
The Finance Ministry set the interest rate every year, which is paid on 31st March.
Partial withdrawal: PPF amount can be withdrawn partially from the seventh financial year onwards.
What is the interest rate on PPF?
The current PPF interest rate is 7.1% p.a. that is compounded annually.
The Finance Ministry set the interest rate every year, which is paid on 31st March.
The interest is calculated on the lowest balance between the close of the fifth day and the last day of every month.
How does the PPF account work?
A PPF account can be opened by an adult for self or on behalf of a minor.
How does the PPF account work?
A PPF account can be opened by an adult for self or on behalf of a minor.
The account tenure is 15 years and the lock-in period for the account is 15 years.
You can make a deposit to a PPF account ranging from Rs.500 up to Rs.1.5 lakh per financial year.
The deposit can be made in a lump sum or in instalments. There is no restriction on the number of instalments per financial year.
The deposit can be made in a lump sum or in instalments. There is no restriction on the number of instalments per financial year.
The deposits must be made every financial year during the tenure and such deposits are exempt from income tax u/s 80C.
Minimum Contribution
You are required to make a minimum deposit of Rs.500 per financial year to keep the account active. If you fail to make this deposit, the account will be discontinued. You will have to pay a penalty of Rs.50 along with a minimum deposit of Rs.500 to reactivate the account.
An interest rate of 7.1% p.a. (Q4 FY2022-23) is applied to the deposit and is compounded annually.
Liquidity
A loan facility is available on the PPF balance. Also, you can make partial and premature withdrawals on the PPF account subject to certain conditions.
Upon completing the tenure, you can choose to extend the account with or without making additional contributions. You also have the option to close the account.
PPF account eligibility
PPF account eligibility
Any Indian citizen can invest in PPF.
One citizen can have only one PPF account unless the seconf account is in the name of a minor.
NRIs and HUFs are not eligible to open a PPF account.
However, if they have an existing PPF account in their name, then it shall remain active till its completion date.
However, these accounts cannot be extended for 5 years as in the case of Indian citizens.
How to open a PPF account?
A PPF account can be opened with either a Post Office or with any comercial bank like the State Bank of India or Punjab National Bank, etc.
Required Documents:
Filled account opening form
KYC documents such as PAN, Bank details Aadhaar, Voters ID, Driving license, etc.
Residential address proof
KYC documents such as PAN, Bank details Aadhaar, Voters ID, Driving license, etc.
Residential address proof
Nominee declaration form
Passport size photograph
Process to open a PPF account online:
Step 1: Log into your bank account on the internet banking or mobile banking platform.
Step 2: Select the ‘Open a PPF Account’ option.
Step 3: If the account is for self, click on the ‘Self Account’ option. If you are opening the account on behalf of a minor, select the ‘Minor Account’ option.
Step 4: Enter the relevant details in the application form.
Step 5: Key in the total amount you want to deposit in the account per financial year.
Step 6: Submit the application. An OTP will be sent to the registered mobile number. Enter it in the relevant field.
Step 7: Your PPF account will get created in an instant! Your PPF account number will be displayed on the screen. An email will be sent to your registered email address with all the details confirming the same.
Process to open a PPF account in a post office
Step 1: Get an application form from your nearest post office or online.
Step 2: Fill up the form and submit it with the required KYC documents and a passport-size photograph.
Step 3: Make the initial deposit required to open a post office PPF account. The amount can range from Rs.500 up to Rs.1.5 lakh per financial year.
Step 4: Once your application is processed, a passbook will be given to you for the PPF account opened.
Loan against PPF
You can take a loan against your PPF account between the 3rd and 6th year. The maximum tenure of the loan is three years (36 months).
The loan amount can be a maximum of 25% of the total available amount.
A second loan can be taken before the 6th year if the first loan is repaid fully.
PPF amount withdrawal
As a rule, one can fully withdraw the PPF account balance only upon maturity, i.e. after the completion of 15 years. Upon completion of 15 years, the entire amount standing to the credit of an account holder in the PPF account along with the accrued interest can be withdrawn freely and the account can be closed.
An account holder can withdraw prematurely, up to a maximum of 50% of the amount that is in the account at the end of the 4th year (preceding the year in which the amount is withdrawn or at the end of the preceding year, whichever is lower). Further, withdrawals can be made only once in a financial year.
Procedure for withdrawal from PPF
In case you wish to partially or completely withdraw the balance lying in your PPF account.
Step 1: Get the application for withdrawal of PPF from the bank/post office (Form 3/Form C) where you have opened the PPF account.
Step 2: Fill in the application form with relevant information.
Step 3: Submit the application to the concerned branch of the bank or post office where your PPF account lies.
PPF Withdrawal Form
An individual must file Form 3/Form C for the withdrawal of the PPF amount. This form has 3 sections:
Section 1: Declaration section where you must give your PPF account number and the amount of money you propose to withdraw. Along with that, you also need to mention how many years have actually passed since the account was first opened.
Section 2: Office use section which comprises details like:
Date when the PPF account was opened
Total balance standing in the PPF account
Date on which the previously requested withdrawal was allowed
Total withdrawal amount available in the account.
The amount of money sanctioned for withdrawal.
Date and signature of the person in charge – usually the service manager.
Section 3: The bank details section asks for the details of the bank where the money is to be credited directly or the bank in whose favour the cheque or the demand draft is to be issued. It is also mandatory to enclose a copy of the PPF passbook along with this application.
Is it mandatory to withdraw the PPF account balance at the end of the 15 years?
It is not mandatory for you to withdraw the PPF balance at the end of the maturity period, i.e. 15 years. You can let the money stay in the account so that it accrues interest as long as you close the account.
Can I extend the tenure of the account for 3 years since I may need the sum then?
You can only extend the account tenure in the blocks of five years upon maturity.
How many times am I allowed to extend the tenure in the blocks of five years?
There is no upper limit on the number of times you can extend the tenure of the account as long as you extend it in the blocks of five years. However, you can only extend the tenure upon the maturity of each block.
I don’t think I can continue to contribute to my PPF account anymore. Can I close my account?
Individuals are allowed to close their PPF account only after completing five years. Also, there are certain criteria to be satisfied in order to close the account.
Who can open a PPF account?
Any resident Indian adult can open a PPF account. In the case of a minor or a person with an unsound mind, a legal guardian can open the account on their behalf.
How to withdraw money from a PPF account?
Fill in Form C with relevant details. You can download this from your bank or Post Office website or at the branch.
Submit the form to the bank or Post Office branch where your PPF account is held.
How to know your PPF account number?
When you open a PPF account offline, the bank or Post Office will provide you with a passbook. The passbook contains all the necessary information about the PPF account, such as the PPF account number, bank/PO branch details, account balance, transactions made in the account, and others. You can get the passbook updated regularly to access the latest data. It
On the other hand, you can log into your account on the internet banking portal. On the home page, choose the PPF account to see the account details, such as the account number, account balance, recent transactions, and others.
When you open a PPF account offline, the bank or Post Office will provide you with a passbook. The passbook contains all the necessary information about the PPF account, such as the PPF account number, bank/PO branch details, account balance, transactions made in the account, and others. You can get the passbook updated regularly to access the latest data. It
On the other hand, you can log into your account on the internet banking portal. On the home page, choose the PPF account to see the account details, such as the account number, account balance, recent transactions, and others.
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