Public Provident Fund (PPF) is one of the most popular saving schemes in India. As the scheme is managed by the Central Government, your money in the PPF account are safe and the returns it generates are guaranteed.
PPF was launched by the Government to benefit small savers along with other small saving schemes like the Senior Citizens Savings Scheme (SCSS), the Sukanya Samriddhi Scheme, and the National Savings Certificate (NSC). With a minimum investment amount of Rs 500 annually, PPF is a best choice for those looking for safe and guaranteed returns.
As PPF falls under the Exempt-Exempt-Exempt (EEE) category, it offers the best tax benefits. This means that, the amount invested in PPF in a financial year gets exempted from a person’s taxable income (Under Section 80C) for that year. Also, the interest received on PPF deposits along with the principal amount have tax exemptions.
The interest rate for PPF is decided and paid by the government for every quarter. PPF interest rate for the 1st quarter of the year 2021-22 (1st April to 30th June 2021) is 7.1%.
Key Features
Lock-in period: PPF is a long-term investment and have a lock-in period of 15 years. This means that the amount invested in a PPF account can be withdrawn only at maturity, which is 15 years. This tenure can be increased by 5 years at the end of the pre-decided lock-in period. Premature withdrawals are allowed only in case of emergencies.
Interest on PPF: Interest on PPF balance is calculated every month, but the amount is credited to the PPF account at the end of financial year. The interest rates are decided and pre-declared by the Government for each quarter. Each month, the interest amount is calculated on the lowest PPF balance in the account after the 5th of every month to the last day of the month. Hence, PPF investors are advised to make contributions to their PPF account before the 5th of each month.
Minimum and maximum investment: A person will have to invest at least Rs 500 annually and a maximum limit of investment is Rs 1.5 lakh annually in a PPF account.
Tax benefits of investing in PPF
PPF falls under the Exempt-Exempt-Exempt (EEE) category and all the deposits made in the PPF are allowed for exemption under Section 80C of the Income Tax Act. Furthermore, the invested amount and interest is also exempt from tax at the time of withdrawal. An important point to know about PPF account is, it cannot be closed before maturity. However, it can be transferred from one region to another area. But, it's not possible to close a PPF account before maturity. Only in the exceptional cases, such as the account holder’s death, the closure of the account can be made.
Eligibility Criteria
- Only a person living in India (Indian citizen) can open a PPF account
- NRIs are not allowed to open PPF accounts. However, an Indian resident who has become an NRI after opening an account can continue the account until maturity.
- Parents/guardians are also allowed to open a PPF account for their minor/children.
- Joint accounts and multiple accounts can not be opened.
Documents required
Here is a list of documents required for opening a PPF account:
- PPF account application form- Form A (The form is available at any bank which is authorized to open a PPF account).
- KYC documents to verify the identity of the person - Aadhaar Card, Voter ID card, or Driving License.
- Proof of Address
- PAN Card
- Passport-size photograph of the person
- Nomination form - Form E (Available at any bank which is authorized to open a PPF account)
How to open a PPF account online?
Step 1: Log into your bank via internet banking or mobile banking platform.
Step 2: Select the option ‘Open a PPF Account’.
Step 3: If the account is for self, click on the option ‘Self Account’. If you are opening the account on behalf of a minor, select the option ‘Minor Account’.
Step 4: Enter the asked details and fill the application form.
Step 5: Type the total amount you want to deposit in the account annually.
Step 6: Submit the application. You will get an OTP on your registered mobile number through SMS. Enter it in the relevant field.
Step 7: Your PPF account will be created instantly and your PPF account number will be shown on your device's screen. You will receive an email on your registered email address with all the details confirming the same.
List of Banks opening PPF account
A PPF account can be opened either at your nearest Post Office branch or at a participating bank's. Here is the list of participating banks that offer a PPF account are given below:
- Bank of Baroda
- HDFC Bank
- ICICI Bank
- Axis Bank
- Kotak Mahindra Bank
- State Bank of India
- Bank of India
- Union Bank of India
- Oriental Bank of Commerce
- IDBI Bank
- Punjab National Bank
- Central Bank of India
- Bank of Maharashtra
- Dena Bank
Procedure for PPF withdrawal
To withdraw your investments from the PPF account, you will need to submit (Form C). You will have to submit the form to the branch in which you have your account. Form C has three sections: (1) Basic details section, (2) Office use section and (3) Acknowledgement section.
Basic details section
This section has to be filled by the account holder. It includes following the details:
- PPF Account number
- The total balance in PPF account
- Amount to be withdrawn
- Date of last withdrawal
- The total number of years from the first year of investment
Office use section
This section will be filled by the withdrawal team of PPF of any branch. The account holder will not have to worry about filling this section. It includes the following:
- Date of initial investment
- Amount in PPF account
- Date of last withdrawal
- The amount available of withdrawal
- The sanctioned withdrawal amount
- The date and signature of the officer
Acknowledgement Section
This section includes an acknowledgement which has to be signed by the account holder mentioning the following details:
- A bank account number and other details like IFSC code, branch name etc.
- Name of the account holder
- Revenue stamp
The account holder, along with the above form, have to give the PPF passbook. Also, all the withdrawals, either done in full or partial, prematurely or fully matured, are free from tax. The account holder will not need to pay tax on any withdrawals. However, for premature closure, the account holder will have to pay a penalty of 1%.
(Also Read: National Pension Scheme)
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