PPF - Public Provident Fund Last Updated : 23 Sep 2019

About PPF

PPF scheme was launched in 1968 by the Finance Ministry’s National Savings Institute. The main objective of PPF scheme is to help individuals make small savings and provide returns on the savings.

The PPF scheme offers an attractive rate of interest and no tax is required to be paid on the returns that are generated from the interest rates.

For more information, Check out related articles PPF Account Online, PPF Interest Rate, PPF Rules & PPF Withdrawal

Eligibility to open a PPF account

The eligibility criteria to open a PPF account are mentioned below:

  • Indian citizens are eligible to open a PPF account.
  • An individual can open only one account under his/her name. However, another account can be opened by the individual on behalf of a minor.
  • Non-resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not allowed to open a PPF account.

How to open a PPF account?

Individuals can open a PPF account at banks or at post offices. Earlier, opening a PPF account was allowed only at Nationalised Banks, however, private banks such as Axis, HDFC, and ICICI Bank also offer the PPF scheme. The documents required to open a PPF account is mentioned below:

  • The application form must be submitted.
  • ID proof such as Aadhaar card, Permanent Account Number (PAN) card, passport, etc., must be submitted.
  • Address proof with the current address mentioned on it should be submitted.
  • Signature proof.

After submission of the above documents, the amount that is required to open a PPF account can be deposited.

Public Provident Fund
Public Provident Fund

Features of a PPF account

The main features of the PPF account are mentioned below:

  • Duration of the account: The minimum duration of a PPF account is 15 years. However, account holders can extend the duration of the account by a block of 5 years.
  • Amount required to open a PPF account: The amount that is required to open a PPF account is Rs.100. In a year, if the annual investment that is made towards the account exceeds Rs.1.5 lakh, no interest will be earned on the excess amount, and no tax deductions can be claimed as well.
  • Deposit modes: PPF Payments towards the account can be made in the form of PF transferonline, Demand Draft, cheque, or cash.
  • Number of accounts that can be opened: An individual can open only one PPF account under his/her name. Under the PPF scheme, joint accounts cannot be opened.
  • Minimum and maximum amount: The minimum and maximum investment that can be made in a financial year are Rs.500 and Rs.1.5 lakh, respectively. PPF Investments can be paid in a lump sum or in instalments. The maximum number of instalments that are allowed is 12.
  • Frequency of deposits: Deposits must be made at least once a year for 15 years.
  • Safety of opening a PPF account: A PPF account offers risk-free, guaranteed returns, and capital protection as it is backed by the Government of India. Therefore, opening a PPF account comes with minimal risks.
  • Loans against a PPF account: Between the third and fifth financial year from the date of opening the PPF account, PPF loans can be availed against the account. The amount that can be availed as a loan is 25% of the investments that have been made at the end of the second financial year. Individuals can also avail a loan after the sixth financial year as well. However, the first loan must be completely paid before availing a second loan.

PPF Interest Rate

Currently, the rate of interest that is provided on a PPF account is 7.9% p.a. and it is compounded on an annual basis. The interest is paid on March 31 and the PPF interest rate is set by the Finance Ministry on a yearly basis. The calculation of interest is based on the minimum balance that is available between the close of the fifth day and the last day of the month.

PPF Tax benefits

Investments that are made under a PPF account come under the Exempt-Exempt-Exempt (EEE) category. Therefore, under Section 80C of the Income Tax Act, all deposits made towards a PPF account are tax exempt. The amount that has been saved as well as the interest that has been generated are also exempt from tax when the individual withdraws the amount from the PPF account.

Premature closure of a PPF

After completion of 5 years is it possible for individuals to opt for premature closure. However, premature closure is allowed in case of treat diseases that can cause harm to the life to the life of the PPF account holder, parents, children, or spouse. For which, documents from an accomplished medical authority must be submitted.

Premature closure is allowed in case of higher studies of the minor account holder or for the account holder as well. However, documents such as fee bill and the admission confirmation from a recognised university in India or abroad must be submitted.

Attachment of a PPF account

Debtors will not be able to access the PPF account of the individual to claim their dues as the PPF account cannot be attached by a court. However, this rule does not apply to income tax authorities. Therefore, if the account holder has any dues pending, the PPF account can be attached for the payment of dues.

PPF Withdrawal

Individuals can close the PPF account only after the completion of the 15 years. Once the 15 years is completed, the account holder can withdraw the entire amount that has been saved in the account as well as the interest that has been generated.

However, in case the account holders need funds, partial withdrawal of funds is available after completion of 6 years of opening the account. The account holder can withdraw 50% of the funds that are available after the fourth year in case of PPF premature withdrawal. It can either be at the end of the preceding year or the year before which the amount is withdrawn, whichever is lower. However, account holders are allowed to make withdrawals only once a year.

FAQ's

  1. Can I increase my investment under the PPF scheme by opening 2 or more accounts in my name?

    No. Under the Public Provident Fund Scheme, a person can hold and operate only one account in his/her name.

  2. Can I continue to use an inactive account?

    Yes. You can do so by paying the holding branch a penalty of Rs.50 for every year the account was inactive. You will also have to deposit a minimum of Rs.500 for every year the account was inactive as well as Rs.500 for the year you are activating the account.

  3. Will I continue to earn returns if my account is inactive?

    No. Interest will not be calculated for the year(s) the account is inactive. Once the account is revived, interest will be calculated on the balance held at time of revival.

  4. If I open a PPF account in my minor child’s name, can I claim tax deductions from both accounts i.e. my child’s and mine, when I file taxes?

    The maximum investment cap of Rs.1.5 lakhs applies to all contributions you make to your account, your minor child’s account and/or your spouse’s account, collectively. Only amounts up to Rs.1.5 lakhs can be claimed as deduction U/S 80C of the Income Tax Act. For e.g. if you contribute Rs.1 lakh toward your account and Rs.1 lakh toward your child’s account, you can claim only Rs.1.5 lakhs as deduction and not Rs.2 lakhs.

  5. What if I wish to invest more money than the Rs.1.5 lakh limit?

    Interest will be calculated and paid out only on amounts up to Rs.1.5 lakhs for any year. Only the maximum annual investment limit i.e. Rs.1.5 lakhs a year will be considered towards all PPF calculations for all purposes.

  6. The limit was raised from Rs.1 lakh to Rs. 1.5 lakh mid-way through 2014. If the limit is raised this year in the same way, how will I make the additional deposit? Should I wait for next year?

    When the limit is raised during a financial year, banks and post offices are instructed to accept additional investments if investors wish to contribute up to the revised maximum limit. This is what was done last year for those who wished to contribute up to Rs.1.5 lakhs under the revised limit.

  7. How is interest calculated? I got interest for 11 months instead of 12 months for the last year.

    For any given month, investments made on or before the 5th will be considered for interest calculations for that month. Interest is calculated on the lower of the balance held on the 5th of a month to the end of the month.

    For e.g. An account held Rs.1 lakh at the start of September. The account holder decided to invest Rs.50,000. He did so on September 10th. In this case, the balance on the 5th of September was Rs.1 lakh and was Rs.1.5 lakhs at month-end. Here, Rs.1 lakh is the amount that will be considered for calculation of interest. The additional investment of Rs.50,000 would be considered for the month of October.

    If, however, the account holder had deposited the additional Rs.50,000 on September 3rd, the balance on the 5th of September would have been Rs.1.5 lakhs. This would have been the amount considered for interest calculations for the month of September.

  8. I want to leave some money to my grandchild. Can I open the PPF account on her behalf?

    No. Grandparents cannot open PPF accounts in their grandchildren’s names. The amount can be given to the parent/guardian who can open and operate the account in the name of their minor child/ward. However, if both parents of the minor child die, the grandparents, as guardians, can open and operate a PPF account for the minor child.

  9. Is it mandatory to withdraw all the money in my PF account at the end of 15 years?

    No. It is not necessary to redeem all the funds held in the account at maturity. The account term can be continued or extended for as long as the investor wishes to operate it. The account can be continued for 5 years per extension. Extensions can be done by depositing fresh funds or without making any further deposits.

  10. Will I continue to earn interest on my account if I extend the maturity period beyond 15 years?

    Yes. Interest will be calculated and paid out based on the interest rates prevailing during the period of extension. If no fresh deposits are made during the period of extension, interest will be calculated based on the balance held at the end of the 15th year. If fresh deposits are made to extend the term, it will be added to the balance at the end of the 15th year and the total amount will be treated as principal for interest calculations.

  11. Can I extend my account for 2 years on maturity?

    Extensions can be made in blocks of 5 years each.

  12. What happens to the money in my account if I die before maturity?

    It can be claimed by the nominees or the legal heirs in the absence of nominees. If a nominee was named by the account holder, he/she will receive the entire amount held in the account. If more than one nominee was named, the nominees will receive funds held in the account proportionately i.e. as stated by the account holder in the nomination form.

  13. Is it necessary to name nominees?

    It is not mandatory to name nominees for a PPF account. However, it is advisable to do so to avoid conflicts in the event of death and to have a clear transfer of funds to a desired person.

  14. How can a nominee/legal heir claim funds in a PPF account?

    Nominees or legal heirs can claim funds in a PPF account when the account holder has passed away. They will be required to produce proof of death of the account holder. Nominees can claim funds in the proportion stated by the account holder in the nomination form.

  15. How long can I extend my account for?

    PPF accounts have a maturity period of 15 years. However, this can be extended for as long as the account holder wishes to continue it. Extensions can be done for 5 years at a time. For e.g. if an account matures on March 31st 2015, it can be extended till March 31st 2020. The next extension will be until March 31st 2025 and so on.

  16. I deposited money in my wife’s PPF account. Who can avail the tax deduction?

    In this case it will be you who will be able to avail the tax deduction. The person making the contribution is eligible for tax deductions U/S 80C.

  17. I deposited money in my parents’ PPF accounts but did not qualify for tax deduction U/S 80C. Why?

    Only contributions made to an account holder’s own account, his/her spouse’s account or his/her minor child’s account can be claimed as deductions U/S 80C of the Income Tax Act. The total contribution to any one or all of the abovementioned person’s account is subject to the investment cap of Rs.1.5 lakhs per annum.

  18. If I withdraw money from my PPF account, can I redeposit it to meet the minimum annual investment requirement?

    Yes, you can withdraw money for personal purposes. It can be used to invest the Rs.500 required as annual investment.

  19. Can I open a PPF account along with my wife or child?

    No. The option to hold PPF accounts jointly is not provided under the PPF scheme. A person can hold and operate only one account in his/her own name.

  20. If I need money, can I make withdrawals in addition to taking out a loan against my PPF account?

    No, withdrawals and loans are exclusive of each other as per the rules of operating a PPF account. Loan facilities are extended to account holders only between the 3rd and 6th year of operating an active account whereas partial withdrawals are allowed from the 7th year onwards. This means you cannot avail a loan from the 7th year onwards nor can you make withdrawals before the 6th year.

    This scheme was devised to promote savings and while loans and withdrawals are allowed to a certain extent to allow for some liquidity, the scheme, in general, does not aim to encourage a reduction in savings potential.

News About Public Provident Fund

  • PPF acts as a retirement tool

    The Public Provident Fund (PPF) scheme is a long-term savings tool that provides safety, guaranteed returns, and tax savings benefits. Therefore, the scheme is not very popular for individuals who are willing to take risks in the market. Due to the various benefits, the scheme is popular for individuals who wish to save for their retirement. The high rate of interest that is provided by the scheme also makes it very popular.

    The minimum and maximum contributions that can be made towards the scheme are Rs.500 and Rs.1.5 lakh, respectively. However, the scheme comes with a lock-in period of 15 years. Tax benefits of up to Rs.1.5 lakh is provided under Section 80C of the Income Tax Act. Under certain circumstances, partial and premature withdrawal of the balance that is available in the account is possible. Individuals who do not have an Employees’ Provident Fund (EPF) account can open a PPF account because of its high rate of interest. A PPF account can be opened at banks as well as at post offices. Therefore, individuals who are aiming to save money for their retirement must start investing in a PPF account for long-term savings.

    16 July 2019

  • Interest Rates on Small Savings Schemes may fall further

    According to experts, the interest rates that are being offered by small savings schemes such as Sukanya Samriddhi Yojana, Senior Citizens Savings Scheme, and Public Provident Fund (PPF) may fall even further in the upcoming quarters. The interest rates for these schemes have been cut for the July-September quarter.

    The revised interest rates for the PPF, National Savings Certificate, Sukanya Smariddhi Yojana, and Senior Citizens Savings Scheme are 7.9%, 7.9%, 8.4%, and 8.6%, respectively. Earlier, the interest rates were 8.0%, 8.0%, 8.5%, and 8.7%, respectively. The benchmark rates have already been cut by RBI thrice since the beginning of the year. Since the announcement of the Budget, there is more room for further cuts as well, according to experts. According to Motilal Oswal, apart from excise cess hike on diesel/petrol, no measure has been taken to decrease the inflationary pressures that are present in the economy. Therefore, more cuts can be expected by RBI to bring down the policy rates.

    12 July 2019

  • NRIs cannot make fresh deposits in PPF accounts

    RBI regulations state that Non-Resident Indians (NRI) deposit accounts and resident savings accounts to non-resident accounts if they plan to settle abroad. These accounts can be non-resident ordinary (NRO) or non-resident external (NRE). NRIs cannot make any fresh deposits in Public Provident Fund (PPF) accounts although they can continue to hold onto it until it reaches the maturity period of 15 years. Mutual funds that were bought while being a resident Indian can continue to be held while being an NRI. In India, PPF account accretions are not taxable but it could be taxable in foreign countries depending on the tax laws there. NRIs can also remit balances in their NRO accounts up to Rs.1 million a year. The tax on the income received in an NRO account, which is to be repatriated, has to be paid in India.

    19 March 2019

  • Centre Hikes Interest Rates of PPF and NSC by 40 Bps

    In a bid to catch up with the tightening liquidity, the government has increased the interest rates of the Public Provident Fund (PPF) and the National Savings Certificate (NSC) by 40 basis points. The hike in the interest rates is for the quarter October-December. The increase in the interest rates for these savings schemes closely follows the rise in interest rates for bank deposits after the Reserve Bank of India (RBI) repo rate hikes. The interest rates has stayed constant over the last 2 quarters after a reduction by 20 bps in the quarter of January-March.

    The government’s decision comes as no surprise, since the move aligns with rise in the deposit rates of banks. The current interest rate will now be 8% as opposed to 7.6% for the NSC and PPF and the interest rate of the Kisan Vikas Patra (KVP) will now by 7.7% as opposed to the 7.3%.

    25 September 2018

  • Improved Guidelines Launched by the Government for Treasury Investment

    The Shipping Ministry has recently issued new guidelines for investment pertaining to major ports in India. The issues have been introduced in order to enhance the existing conditions surrounding treasury investment in Indian ports. Investment procedures and subsequent achievements and returns were not streamlined for a very long time, especially for the individuals operating from the ports of India. Therefore, to improve the procedures, the Shipping Ministry issued new guidelines on the provident fund (PPF) investment based on the guidelines provided by the Employee Provident Fund Organization from the Labor Ministry and Employment, 2015. The Shipping Ministry also issued another guidelines on the investment of additional funds that are based on the fundamentals of the guidelines of the Department of Public Enterprises) in the year 2017.

    These new guidelines from the Shipping Ministry and the Indian Government are a result of the low earnings that these investments have been making. The newly established guidelines, on the other hand, are supposed to increase the PPF investment funds and surplus funds by at least 1 to 1.5% all across the ports in India. This issuance will add Rs.150 crore to the existing value of the returns that are currently generated from these investments. In order to boost profits and help the individuals make the most of their investments, the Shipping Ministry has successfully launched a series of initiatives across all major Indian ports. One of these most important initiatives is the improvement of the returns that are earned on investments made in treasuries by the ports with regards to provident funds, pension funds, and surplus funds. Across the ports mentioned above, the funds of these investments are believed to, which in turn yields an interest of about Rs.2,700 crore.

    3 August 2018

  • PPF Accounts - Some things to know

    PPF accounts interest rates is fixed at 7.6 percent for the quarter ending in September 2018. The interest for these accounts is compounded on a yearly basis and after the completion of every year, the interest is added to the principal amount. The interest in generally calculated between the 5th and the end of the month. The interest will be paid on the 31st of March every year. All the contributions made to your PPF account can be claimed for tax benefits up to Rs.1.5 lakh under Section 80C of Income Tax Act of 1961. This tax benefit it offers comes under EEE tax status. The proceeds received at the time of maturity and the interest earned are all exempted from tax. You can take loans on your PPF accounts after the completion of the third financial year. This option is available till the 5th financial year and the loan can be taken once every year. There is an option for partial withdrawal of funds after the completion of the seventh financial year from the date of opening of the account. Only 50% of the amount that has accumulated by the end of the fifth year can be withdrawn.

    20 July 2018

  • Interest Rates for Small Savings Schemes Unlikely to Increase

    A notification by the Finance Ministry indicated that the interest rates for small savings schemes such as PPF, NSC and other savings schemes are unlikely to increase in the next quarter. Interest rates for government-run savings schemes are fixed every quarter but despite the increase in bond yield, interest rates for this quarter will remain the same.

    Usually, the interest rates for small savings deposits use the Government Securities as a benchmark for interest rates. However, in the previous quarter, the interest rates for savings schemes were decreased by 0.2%. As a result of the lowered interest rates, the NSC and the PPF now earn an annual interest of 7.6 %, while the Sukanya Samriddhi scheme deposits earn an annual interest of 8.1%.

    3 April 2018

  • Interest Rates for Small Savings Schemes to remain the same

    The Government has decided not to alter the interest rates for all small savings schemes for this quarter. This decision is an attempt to match the hardening interest rates that are currently being offered by banks. At present, the interest rates for the savings schemes are as follows: 8.3% for Senior Citizens Savings Scheme, 7.6% for the PPF and NSC, 8.1% for the Sukanya Samriddhi Scheme and 7.3% for the Kisan Vikas Patra.

    In 2016, the finance ministry has stated that the rates for small savings schemes will be linked to government bond yields. This decision was made in an attempt to have banks lower their deposit rates for the small savings schemes offered by the government.

    Additionally, an indefinite extension has been granted to all savings schemes investors for submitting their Aadhaar details.

    30 March 2018

  • Plans for making Post Office Savings Account Mandatory for Savings Schemes Investors Called Off

    The Department of Post issued a memorandum on March 23 about dropping the decision to credit interest and maturity incomes from savings schemes to post office savings accounts. The plan was withdrawn after investors in the scheme expressed disapproval towards having to open another savings account.

    The government had initially issued a memo in August 2017 stating that the income earned from interest and maturity of post office savings schemes would be credited to post office savings accounts, thereby making it mandatory for all investors in the scheme to open a savings account with the post office. Since the initial announcement, the interest and maturity proceeds for savings schemes investors has been withheld, demanding that a post office account be opened for the proceeds to be transferred.

    Additionally, linking of the Aadhaar with savings scheme details has also been put on hold indefinitely until the Supreme Court addresses the legality of the Aadhaar act.

    30 March 2018

  • No Attachments for PPF Corpus

    In what would could make the Public Provident Fund one of the most attractive saving schemes out there, the Finance Bill of 2018, announced that the PPF corpus of the subscriber under no circumstance can be attached to a liability or a debt (loan, etc.) under any court decree and can be used and withdrawn only by the individual owner of the account. As per the statement, “the amount standing to the credit of any depositor in the Public Provident Fund Scheme shall not be liable to attachment under any decree or order of any court in respect of any debt or liability incurred by the depositors”. This has ensured the security of the corpus of the PPF subscribers, making sure that no bank,  financial institution or even the government can attach any notice, liability or debt against the corpus - one that will ensure that people stay subscribed to the scheme and continue their contributions till maturity. For those who wish to subscribe to the PPF, the Public Provident Fund is one of the most effective retirement investment tools with strict lock-in period of 15 years - to ensure that it can be used by the subscriber for his/her retirement years. Only after the maturity of the scheme can a subscriber make a total withdrawal from his/her account. All the withdrawal amount at maturity is completely exempt from tax under Section 80C of the Income Tax Act.

    21 March 2018

  • PPF corpus cannot be attached to any Liability, Debt

    In what would be a push for citizens across the country to subscribe to the Public Provident Fund, the finance bill of 2018 released a statement saying that the PPF corpus of the subscriber under no circumstance can be attached to a liability or a debt under any court decree and can be used only by the individual owner of the account only. According to the statement, the amount standing to the credit of any depositor in the Public Provident Fund Scheme shall not be liable to attachment under any decree or order of any court in respect of any debt or liability incurred by the depositors. This move has ensured the security of the corpus of the PPF subscribers, ensuring that no bank, institution or the government can attach any notice, liability or debt against the corpus, a move that will ensure that people stay subscribed to the scheme and continue their contributions till maturity. For those new to the PPF, the PPF is an effective retirement investment tool and comes with strict lock-in period of 15 years, only after which a subscriber can make a total withdrawal from his/her account. All the withdrawal amount at that point is completely exempt from tax under Section 80C of the Income Tax Act.

    19 March 2018

  • PPF changes will benefit investors

    At the Union Budget 2018, which was held on February 1, the Government of India has proposed the enactment of the Government Savings Promotion Act. This act will act as an umbrella for the existing acts that are governing the PPF and other small saving schemes. As per the proposal, the new act will amend the rules and regulations of the PPF with regard to withdrawals and pre closure of accounts and the decisions of one’s PPF account will be left in the hands of the subscriber. As per the rumors, the PPF will allow subscribers to make premature withdrawals and pre closure of accounts in cases such as medical emergencies, to fund their education and so on. As per financial experts, the umbrella act will not take away any of the benefits the PPF and other small saving schemes come with.

    26 February 2018

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