PPF (Public Provident Fund) was introduced by the central government in the year 1968 to mobilize small savings in the form of investment. In this post, I will try to cover everything you wanted to know about PPF (Public Provident fund) | PPF Account.
On December 12, 2019, the Government of India has replaced the Public Provident Fund Scheme, 1968 with PPF Scheme, 2019. Read the notification here
Table of Contents
PPF (Public Provident Fund) | PPF Account
PPF (Public Provident Fund) is one of the popular and best long-term investment schemes in India. The PPF offers safe and risk-free returns with an attractive interest rate coupled with income tax benefits.
PPF scheme is backed by the Indian government. It offers guaranteed returns as well as complete capital protection. So if you want a safe investment option to save taxes with guaranteed returns, you should open a PPF account.
Features of PPF (Public Provident Fund)
- It is a safe and risk-free investment as it is backed by the government of India.
- PPF is a long-term investment of 15 years.
- You can open an account with Rs. 100/- but have to deposit a minimum of Rs. 500/- and maximum Rs. 1.5 lakh in a financial year.
- You can invest as a lump sum or in installments during a financial year.
- The interest rate on PPF set by the government every quarter and better in comparison to other saving schemes.
- The investment up to Rs.1.5 lakh exempted from income tax under Section 80C.
- The entire maturity amount including the interest earned is non-taxable.
- You can avail loans facility from the 3rd to 6th financial year.
- Partial withdrawals allowed subject to certain conditions from the 7th financial year.
- Premature closure of the account also allowed under certain circumstances.
- A PPF account cannot be attached under the court decree order.
- You can transfer the account from one post office/branch to another.
- Nomination facility available at the time of opening and also after opening the account.
- You can extend the account for one or more blocks of 5 years after completion of 15 years.
- At any point in time, you are allowed to have only one account in your name.
Who can open a PPF Account?
- Any citizen of India, 18 years or above can open an account.
- You can’t open a PPF account in joint holding.
- Parents can open another account in the name of a minor child subject to maximum investment limit by adding balance in all accounts. Both parents cannot open a separate account for the same minor. If both parents not alive then a person appointed as the legal guardian can open an account on behalf of the minor.
- NRIs cannot open an account. If a resident Indian, who opened an account, subsequently becomes an NRI during the maturity period, the account shall be deemed to be closed with effect from the day he or she becomes an NRI.
- HUFs are not allowed to open PPF accounts.
How to open a PPF Account?
You can open a PPF account at either a post office or at any nationalized bank. You can also open an account at certain private banks as well.
Just fill and submit the account opening form along with the required documents (KYC documents) and deposit the minimum pay-in towards the opening of the account.
PPF account in most of the banks can now be operated online.
Documents required for opening a PPF Account
- Account opening form.
- Identity proof (PAN card).
- Address proof.
- Passport size photograph.
Different forms required for the opening of the PPF account?
The following forms have to be used for opening, closure and other administrative work related to the PPF account.
- Form 1: – Opening of Account form
- Form 2: Form for application for loan/withdrawal
- From 3: Form for application for closure of the account
- Form 4: Application for extension of account
- Form 5: Form for premature closure of the account
Loan against PPF (Public Provident Fund) Account
You can take a loan against your PPF account, subject to certain terms and conditions. You can take loan only between the third financial year till the end of the sixth financial year.
The interest rate chargeable on the loan taken from the PPF account is one percent. Earlier, the interest rate on the loan was two percent.
Partial withdrawals from PPF (Public Provident Fund) Account
You can make partial withdrawals from the PPF account from the 7th year onwards subject to certain conditions. Partial withdrawal allowed only once in a financial year.
Premature closure of PPF (Public Provident Fund) Account
A PPF account matures in 15 years. Now you can close your account before the completion of 15 years in the following special cases:
- To finance the treatment of life-threatening disease of the account holder, spouse or dependent children or parents.
- To finance the higher education of the account holder or dependent children.
- Or if there is a change in residency status of the account holder.
Note that premature closure of the account is allowed after completion of 5 financial years from the end of the year in which it was opened. Also, note that the rate of interest in such a case will be 1% lower than the normal interest rates.
Also Read: List of Banks in India
Extention of PPF (Public Provident Fund) after 15 years
You can extend the tenure for one or more blocks of 5 years each after completion of a compulsory locking period of 15 years. There can be two types of extention:
- Extention without contribution
Note that once you choose extention without contribution option, then you will not have the option to make deposits again thereafter. However, such account will continue to earn interest rate as applicable to the scheme.
- Extention with contribution
If you wish to continue your PPF account with deposits then you need to inform the same to the authority.
Note: This post was originally published in June, 2018 and has been completely updated for accuracy and comprehensiveness.
PPF (Public Provident Fund) | PPF Account
Related Post: National Pension Scheme | NPS Scheme
Related post: How to open PPF account in SBI online?