Everything about Public Provident Fund Account

Here is a complete list of everything that you need to know about PPF Account- how to open an account, withdraw money, interest calculations as well as tax benefits of the same.

The Public Provident Fund or PPF, as it is commonly known, is a long term investment instrument aimed at creating savings along with tax benefits. Public Provident Fund was introduced in India in 1968 by the National Savings Institute of the Ministry of Finance. A Government backed saving programme, PPF is a secure investment with attractive interest rates and tax exemption as its key features. Opening a PPF Account

All Indian residents above the age of 18 are eligible to open a PPF Account. An Account on behalf of minors can also be opened by the adults. Public Provident Fund Accounts can be opened at a Post Office or any Nationalized Bank. With various regulations set forth by the Government, certain Private Banks such as HDFC, Axis Bank and ICICI Bank are also now authorized to maintain PPF Accounts for consumers.

First, you need to fill in the form for opening an account which needs to be submitted along with all necessary KYC documents which provide proof of age, address, signature, etc. On approval of the same from the relevant bank or Post Office, the Account can become functional with the deposit of the initial amount.

The Public Provident Fund provides benefits to the account holder in more ways than one. Listed below are the key features of the fund:

• Tenure: The minimum time period of a Public Provident Fund is 15 years which can further be extended in multiples of 5 as the account holder may desire to.
• Investment Amount: As per the Government regulations, a minimum of Rs.500 must be deposited in the PPF Account every financial year and the limit for the maximum amount is set at Rs. 1.5 Lakhs. The account holder can invest the amount on a monthly basis or at once for the whole year, as the case may be.
• Frequency of Investment: It is mandatory to deposit an amount at least once a year to keep the Account functional for a minimum period of 15 years.
• Mode of Investment: The investment can be deposited by Cash, Cheque, Demand Draft or via online transfer, as it may be suitable.
• Appointing a Nominee: The Account holder can appoint a nominee of his/her choice at the time of opening the Account or any time later.
• Loan against PPF: The Account holder can take a loan against the PPF account only after the completion of the second year and until the fifth year of the tenure. A second loan can be taken again in the 6th year, only if the first loan amount has been completely cleared.

The interest rate applicable on the Public Provident Fund is 8% which is the revised rate from the earlier rate of 7.6%. The interest is calculated on the lowest balance every month and is compounded annually. This interest as decided by the Ministry of Finance is payable on the 31st of March every year.

Public Provident Fund is exempted from tax under the Income Tax Act and comes in the EEE Category. Section 80C of the Income Tax Act exempts all deposits made to the PPF from tax along with the interest earned. The only applicable clause is the completion of the tenure of 15 years before which the account cannot be closed. In the event of the demise of the account holder, the nominee can submit an application for closing the account.

The Public Provident Fund has a maturity tenure of 15 years and the account holder can withdraw the accumulated amount along with the interest earned at the end of the term. There is a provision for partial withdrawal after the completion of 6 years. If the account holder decides to withdraw the PPF amount prematurely, he may do so in the 7th year of the tenure. This withdrawal amount is however, limited to 50% of the amount which is in the account at the end of the 4th year of the tenure. Any such withdrawals are limited to only once in one financial year.

Withdrawal from the PPF Account, partially or completely at the end of the tenure, can be done through a very simple process. The first step towards this is submitting a Form C application along with the PPF Passbook with the respective Bank or Post Office. The form is available at the banks and can also be availed online. The form comprises of three important divisions which have to be duly filled in order to process the withdrawal.

• Declaration: This part of the form has the details of the account number and the amount that the account holder wishes to withdraw. It also asks for the number of years since the account is in existence.
• Office Use: This part of the form deals with all the basic details pertaining to the account which may be important for the bank or the institution to know.
  • Date of opening the PPF account.
  • Total balance in the PPF account as on this date.
  • Date on which any previous withdrawal may have been made.
  • Total withdrawal amount available in the account.
  • The amount of money which has been sanctioned for withdrawal.
  • Signature of the person in authority along with the date.
• Bank Details: This part of the form comprises of the details of the Bank where the money is to be transferred from the PPF Account or if a cheque or demand draft is to be issued.

Public Provident Fund is backed by the Indian government, and hence, offers guaranteed returns while providing complete capital protection. Risk involvement in holding a PPF account is the minimum with complete tax exemption and partial withdrawal also helps in times of financial needs. A PPF account is available only for individuals and cannot be opened in joint names or under any company or entity name.

Recommended Read: Start Your Investment Journey? Here’s How PPF will Help You