PPF - Public Provident Fund

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The Public Provident Fund (PPF) scheme is a very popular long-term savings scheme in India because of its combination of tax savings, returns, and safety. The PPF scheme was launched in 1968 by the Finance Ministry’s National Savings Institute. The main objective of the 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.

PPF Information

Tenure 15 years (Can be renewed in blocks of 5 years)
Interest rate 7.1%
Investment Amount Minimum Rs.500, Maximum Rs.1.5 lakh p.a.
Maturity Amount Depends on the investment tenure

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

You can invest in the PPF if you meet these criteria:  

  • You are a citizen of Indian  
  • You can open only one PPF account unless your second PPF account is in the name of a minor. 

You cannot invest in PPF is you are an NRI or HUF.  

How to open a PPF account?

Public Provident Fund
Public Provident Fund

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.

How do you Close a Public Provident Fund

Account?

  • The rules governing Public Provident Fund accounts say that you cannot withdraw the Public Provident Fund account balance after your Public Provident Fund account finishes its tenure (15 years).
  • Once the completion of your 15-year term, you can get access to the Public Provident Fund account balance, and also withdraw it.
  • Any time before the completion of the full tenure of the account, you cannot withdraw the entire Public Provident Fund account.
  • The premature withdrawal of your Public Provident Fund up to 50% of the account balance is allowed once you complete 5 years of the Public Provident Fund.

The Importance of PPF

  • PPF is considered to be one of the best investment tools and is suitable for those with low-risk appetite.
  • The returns are low since this investment tool is market linked.
  • The returns are fixed and can be used as a diversification tool and also offers tax-saving benefits.

Features of a PPF account

The main features of the PPF account are mentioned below:

  • Investment Limits:

For a PPF, you should have a minimum investment of Rs.500 and your maximum investment is Rs.1.5 lakh for every financial year.

  • Tenure of the PPF:

The minimum tenure of a PPF is 15 years. This can be extended in sets of 5 years.

  • Deposit Frequency:

Your deposits into the PPF account have to be made once every year for a tenure of 15 years.

  • Opening Balance:

You can open a PPF account with Rs.100 and annual investments over Rs.1.5 lakh will not earn any interest.

  • Nomination:

As a PPF account holder, you can have a nominee for your account when you open the account or after.

  • Mode of deposit:

You can make a deposit into the PPF account via cheque, cash, demand draft, or online fund transfer.

  • Risk factor:

The PPF is backed by the Indian government, and so, it is risk-free and offers guaranteed returns.

  • Joint accounts:

You can hold a PPF account in only one individual’s name.

Loan against PPF

  • You can avail yourself of the option of availing loan against your PPF during the third and sixth year of your contribution. The maximum tenure for which you can avail this loan is for three years.
  • The loan amount that you can avail should be 25% of the total amount available in your PPF account.
  • If you repay your first loan completely, then you can take a second loan before the beginning of the sixth year.

PPF Interest Rate

Currently, PPF interest rate has been reduced from 7.9% to 7.1% 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.

Tax Benefits you get When you Invest in Public Provident Fund

  • Public Provident Fund is an investment which comes under the Exempt-Exempt-Exempt (EEE) category.
  • This means that the deposits that you make in the Public Provident Fund will be deductible (Section 80C of the Income Tax Act).
  • The amount that you accumulate and the interest will be exempt from tax when you withdraw the money.
  • You should note that you cannot close a Public Provident Fund account before maturity.
  • You cannot close a Public Provident Fund account prematurely.

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.

How does your Form C look like

Form C has three sections:

Section 1 will have a declaration section where you will have to mention your PPF account number and the amount you wish to withdraw. You will also have to mention the number of years since you opened the PPF account

Section 2 will require the mention of several details such as:

  • Date on which the PPF account was opened
  • Total outstanding balance in the PPF account
  • Date on the amount was previously withdrawn
  • Total amount withdrawn
  • The amount sanctioned for withdrawal
  • Date and signature of the service manager.

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

Once your PPF account attains maturity, you can then withdraw the complete maturity amount, here the tenure being 15 years. After 15 years the complete deposit amount along with the interest accrued will be disbursed to your bank account.

However, in case you are in immediate need of funds, you can partially withdraw from the seventh year onwards. You can make a premature withdrawal of up to 50% of the total amount available in your account at the end of the fourth year. However, this facility can be availed only once.

How to Withdrawal Funds from Your Public Provident Fund

Follow these steps to withdraw money from your Public Provident Fund account:

Step 1: You should fill in an application form with Form C and enter the required information.

Step 2: Then, submit the application to the required bank branch where the PPF account is.

How to link Aadhaar with a Public Provident Fund account online?

Step 1: Log into the internet banking account.

Step 2: Select ‘Registration of Aadhaar Number in Internet Banking’

Step 3: Type in the 12-digit Aadhaar number and click ‘Confirm’.

Step 4: Choose the Public Provident Fund account you want to link with your Aadhaar card

Step 5: Click on ‘Inquiry’ to check if the Aadhaar linking is done.

How do you Withdraw Funds from Your Public Provident Fund Account Before Maturity?

Step 1: First, make sure to check if you are eligible for a premature withdrawal of your Public Provident Fund.

Step 2: If you are, then download Form C.

Step 3: If your account is in the name of a minor, you need to provide one more declaration which states that the money withdrawn is for the minor and that he/she is alive.

Step 4: Submit the form and documents to the bank or a post office branch.

Step 5: If the information and documents are verified, the bank or post office will process the forms and you can withdraw the money.

FAQ's on PPF

  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 PPF 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 PPF

  • Public Provident Fund Accounts of Hindu Undivided Family Cannot be Extended

    Post offices have begun posting signs in their branches declaring that Hindu Undivided Families (HUF) Public Provident Fund (PPF) accounts cannot be extended. Apart from individuals, some entities such as HUFs were able to open and invest in PPF accounts until April 2005. However, in May 2005, the law was changed to indicate that only people can open accounts and receive PPF benefits.

    13 May 2022

  • PPF interest rate at 7.1% per annum for the quarter ending on 31 March 2022

    The government sets the Public Provident Fund (PPF) interest rates every quarter. For the quarter that ends on 31 March 2022, the interest rate is set at 7.1% p.a. The minimum and maximum deposits that can be made in the account every year are Rs.500 and Rs.1.5 lakh, respectively. Loans can be availed against the money that is available in the account.

    29 March 2022

  • These accounts will become inactive if there is no minimum deposit

    As the end of the financial year is near, you have to maintain a minimum deposit in many tax-saving schemes to keep them active. If you do not deposit a minimum amount in a financial year in National Pension System (NPS), Sukanya Samriddhi Yojana (SSY), and Public Provident Fund (PPF), the accounts will be inactive.

    28 March 2022

  • Two or more PPF accounts won’t be merged

    There will be no more than one Public Provident Fund (PPF) account per person. After 12 December 2019, any PPF accounts that were opened after that date will be closed and no interest will be paid. It is also forbidden to merge multiple PPF accounts. Multiple accounts that were established before this date, on the other hand, can be combined by requesting amalgamation.

    8 March 2022

  • Aadhaar-PF Linking Extended till December 31 for These People

    As per an announcement by the Employees’ Provident Fund Organisation (EPFO) the last date for linking of Aadhaar card to the universal account number (UAN) has been extended till 31 December 2021. The regulatory body made the announcement on 11 September 2021, that the deadline has been is extended in the North East as well as certain other class of establishments till 31 December 2021. The announcement comes after the EPFO learnt the inconvenience the previous deadline had put on both employees and employers due to Covid-19 pandemic.

    17 September 2021

  • No changes introduced to the small savings scheme rates for the second quarter of FY22

    The Ministry of Finance has announced that there will be no changes in the rates of interest for a number of small savings schemes. The announcement was made on 30 June 2021 and the rates are effective for the second quarter of FY 2021-22.

    The rates for instruments which come under the small savings category such as Public Provident Fund (PPF), Senior Citizens Savings Scheme (SCSS), Monthly Income Scheme (MIS), and National Savings Certificate (NSC). The rates offered for these schemes vary from 4% to 7.6%.

    13 July 2021

  • Government schemes that offer returns of up to 6.9% in India

    In the past, the Government of India has come up with several investment schemes that offer lucrative income tax rebates. Currently, the government is offering 8 small savings schemes through selected banks and post offices across the country.

    The finance ministry has recently cut down the interest rates for small savings schemes by as much as 110 to 250 bps. That said, the rate of interest on PPF has been cut down to 6.4% as opposed to the 7.1% which was being offered earlier. However, there are still a handful of savings schemes which offer a good percentage of returns. For example, the Senior Citizens Savings Schemes offer 6.5% p.a. the NSC or the National Savings Certificate plan also brings in a return of about 5.90%, while the Public Provident Fund fetched 6.4%.

    1 June 2021

  • Revive your inactive PF account now

    PPF investments have a tenure of 15 years and any deposit which amounts to up to Rs.1.50 lakh will be exempted from tax deductions (section 80C of the Income Tax Act, 1961). A deposit of minimum Rs.500 every financial year is required to keep our account active. You need to write an application and submit all documents to the facility if your account is inactive. You will have to deposit some money and penalties for the delay in your payments. The bank or the post-office will look into your request and after verification, the account will be active.

    30 April 2021

  • Interest rate cut on small savings schemes and PPF is withdrawn

    The Central Government has withdrawn its announcement on slashing the interest rates for small savings schemes, including Public Provident Fund (PPF) and post office deposits. The interest rate was supposed to have been reduced by 110 basis points. The interest rate for PPF was cut from 7.1% to 6.4% which was the lowest since 1974. However, it was soon announced that the orders were withdrawn and that interest rates would continue to be the same as the quarter of 2020 to 2021, or the interest rates as of March 2021. Currently, the savings deposit interest rate is 4.0%, 5-year recurring deposit is 5.8%, Senior Citizens Savings Scheme interest rate is 7.4%, Monthly Income Scheme is 6.6%, National Savings Certificate is 6.8%, PPF is 7.1%, Kisan Vikas Patra is 6.9%, and Sukanya Samriddhi is 7.6%.

    6 April 2021

  • Income Tax Rules for Post Office Savings and PPF Cash Withdrawal

    New rules for Tax Deducted at Source (TDS) have been issued by the Department of Post with regard to cash withdrawals that exceed Rs.20 lakh from any of the National (Small) Savings Schemes, which also includes the Public Provident Fund (PPF). Some of the new rules are as follows: For non-ITR filers, if the aggregate cash withdrawal is more than Rs.20 lakh but is within Rs.1 crore during a financial year, the payable income tax will be 2% of the amount which exceeds Rs.20 lakh. However, if the cash withdrawal is more than Rs.1 crore in a financial year, the payable income tax is 5% of the amount that is above Rs.1 crore. For those who are ITR filers, if cash withdrawal is more than Rs.1 crore in a financial year, 2% of the amount that is above Rs.1 crore has to be paid as income tax.

    17 Mar 2021

  • Union Budget 2021 - No changes in income tax slabs, Section 80C exemption, or PPF limit

    There were no changes announced in the Union Budget 2021, announced by Finance Minister Nirmala Sitharaman, on income tax slabs, Section 80C exemption, or PPF limit. A proposal was put forward to have a faceless income tax appellate tribunal and also to reduce the timeline given to reopen income tax cases from 6 years to 3 years.

    03 Feb 2021

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