Everything You Need to Know About Public Provident Fund (PPF) - A Comprehensive Guide

The Public Provident Fund (PPF) scheme is a savings scheme launched by the Government of India in 1968.

It is a long-term investment option offered by the Government of India. It is a savings scheme that not only helps individuals save for their future but also offers tax benefits.

The scheme is administered by the Ministry of Finance through the post office and authorized banks.

In this article, we will discuss everything you need to know about PPF, including its features, benefits, eligibility, how to open an account, suitability, and alternative options.

Features of PPF

PPF has a tenure of 15 years, which can be extended for a further period of 5 years.
The minimum amount that can be deposited in a year is Rs. 500 and the maximum is Rs. 1.5 lakhs.
The interest rate is determined by the government and is reviewed on a quarterly basis.
The interest earned on PPF is tax-free.
The maturity amount is tax-free.
Deposits can be made into the account through cash, cheques, or online transfer.
Deposits can be made in a lump sum or in instalments.
Nomination facility is available at the time of opening the account or later.
The account can be transferred from one post office/bank to another.

Benefits of PPF

PPF offers a higher interest rate compared to traditional savings accounts.
The investment is eligible for tax benefits under Section 80C of the Income Tax Act.
The maturity amount is tax-free.
The funds in the PPF account are safe and secure as they are backed by the Government of India.
PPF can be used as collateral for loans.
Provides long-term savings for retirement or other financial goals.
Flexible investment options, with a balance between risk and returns.

Eligibility for PPF

Any individual, including minors, can open a PPF account.
NRIs are not eligible to open a PPF account.
One person can open only one PPF account.

How to open a PPF account

PPF accounts can be opened at any designated post office or authorized bank branch.
A minimum deposit of Rs. 500 is required to open an account.
The following documents are required to open a PPF account:
- Identity proof (Aadhaar card, PAN card, passport, etc.)
- Address proof (Aadhaar card, passport, etc.)
- Passport-sized photograph
- Initial deposit amount

Premature withdrawal

The withdrawal process for a Public Provident Fund (PPF) account in India is as follows:

Eligibility: The account must have completed at least five financial years to be eligible for withdrawal.
Form: Fill out Form C and submit it to the bank or post office where the account is held.
Timing: Withdrawals can be made once a year, starting from the seventh financial year.
Amount: The maximum amount that can be withdrawn is limited to 50% of the balance at the end of the fourth financial year or the end of the preceding financial year, whichever is lower.
Tax: Withdrawals are tax-free, provided the account has completed five years.
Approval: The bank or post office will process the request and release the funds if the withdrawal is approved.

It’s worth noting that the PPF account will continue to accrue interest until the maturity date even after a withdrawal is made, but the withdrawal will reduce the balance of the account.

It’s best to check with the bank or post office where the account is held for the most up-to-date information on the process and any specific requirements.

Loan against PPF

Here are a few things to consider when taking a loan against a PPF account:

Eligibility: The account must have completed at least three financial years to be eligible for a loan.
Amount: The maximum loan amount that can be taken is limited to 25% of the balance at the end of the second financial year preceding the year in which the loan is applied for.
Interest: The interest rate on a PPF loan is 2% above the prevailing PPF interest rate.
Repayment: The loan must be repaid within 36 months.
Form: Fill out Form H and submit it to the bank or post office where the account is held.
Tax: The interest on the loan is not tax-deductible.

It’s worth noting that taking a loan against a PPF account will reduce the balance of the account and the interest earned on the account.

Also, if the loan is not repaid on time, the account may become non-operational.

Process to transfer PPF account

The process to transfer a Public Provident Fund (PPF) account involves the following steps:

Fill out the PPF account transfer form, which is available at the bank or post office where the account is held.
Provide the necessary documents, such as a photocopy of the PPF passbook, proof of identity, and proof of address.
Submit the form and documents to the bank or post office where the account is held.
The bank or post office will then process the transfer request and transfer the account to the new bank or post office.
The new bank or post office will then issue a new passbook with the updated account details.

Tax benefits of PPF

ax-Free Interest: The interest earned on a PPF account is tax-free, which means that it is not subject to income tax.
Tax-Free Maturity Amount: The maturity amount (i.e., the principal amount and the accumulated interest) is also tax-free.
Tax Deduction: Contributions made to a PPF account are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. This means that an individual can claim a deduction of up to Rs 1.5 lakhs from their taxable income.
No Tax on Withdrawals: Withdrawals made from a PPF account are also tax-free, provided the account has completed five years.
No Wealth Tax: The balance in a PPF account is not subject to wealth tax.

When to deposit money in a PPF account?

he best time to deposit money into a Public Provident Fund (PPF) account depends on the account holder’s financial goals and circumstances. Here are a few things to consider when deciding when to deposit money into a PPF account:

End of the financial year: Many individuals choose to deposit money into their PPF account at the end of the financial year to claim the maximum tax benefits under Section 80C of the Income Tax Act, 1961.
Regularly: Depositing money on a regular basis, such as monthly or quarterly, can help to maximize the interest earned on the account over time.
When you have surplus money: Depositing money in PPF account when you have surplus money can be a good option because PPF account has a lock-in period of 15 years.
Before the 5th of every month: Deposits made before the 5th of every month will be considered as the deposit for that month. Deposits made after the 5th will be considered as the deposit for the following month.

Ultimately, the most important thing is to maintain the minimum deposit amount to keep the account active and to try to deposit money into the account as often as possible.

How to convert a minor PPF account to major?

To convert a minor PPF (Public Provident Fund) account to a major account, the following steps should be taken:

Fill out the PPF application form. This form can be obtained from the bank or post office where the account is held.
Submit the form along with a copy of the minor’s birth certificate and a copy of the guardian’s ID and address proof.
Provide a written request for the conversion of the account from minor to major.
Once the bank or post office receives the documents, they will verify the information and process the request.
After the account is converted, a new passbook will be issued in the name of the major account holder.
Once the account is converted to a major account, the guardian will no longer be a joint holder and the account holder will be fully responsible for the account.

It’s important to note that the account must be active and all the criteria for account conversion to be met. It’s best to check with the bank or post office where the account is held for the most up-to-date information on the process and any specific requirements.

Suitability

PPF is suitable for individuals looking for a long-term savings option with a balance between risk and returns.
It is suitable for those looking for a safe and secure investment option backed by the government.
It is suitable for those looking for a tax-efficient investment option.

Alternative options

National Savings Certificate (NSC)
National Pension System (NPS)
Sukanya Samriddhi Yojana (SSY)
Senior Citizen Savings Scheme (SCSS)
Tax-saving Fixed Deposits (FDs)

NSC is similar to PPF as it also offers a fixed rate of interest and tax benefits under Section 80C. However, the interest rate on NSC is slightly lower than that of PPF.

SCSS is another long-term savings scheme designed for senior citizens. The scheme offers a higher interest rate than PPF and NSC, but it has a maximum deposit limit of Rs. 15 lakh.

NPS is a pension scheme that offers a variety of investment options including equity, debt, and government securities. The scheme offers higher returns than PPF and NSC, but it also comes with higher risk.

Public Provident Fund (PPF) is a long-term savings scheme offered by the Government of India that provides a balance between risk and returns.

It offers a higher interest rate compared to traditional savings accounts and is eligible for tax benefits under Section 80C of the Income Tax Act. The maturity amount is also tax-free.

The funds in the PPF account are safe and secure as they are backed by the Government of India. It also offers a loan facility and premature withdrawal options, subject to certain conditions. PPF is suitable for individuals looking for a long-term savings option, a safe and secure investment option, and a tax-efficient investment option.

However, it is important to consult with a financial advisor before making any investment decisions.

Frequently Asked Questions about the PPF Scheme

What are the eligibility criteria for opening a PPF account? Any individual can open a PPF account, including minors (with a guardian as a joint holder).

Can NRIs open a PPF account? No, Non-Resident Indians (NRIs) are not eligible to open a PPF account.

Can I have more than one PPF account? No, it is not allowed to have multiple PPF accounts in one’s name. However, one can open a PPF account on behalf of a minor.

Can I withdraw money from my PPF account before maturity? Partial withdrawal is allowed after completion of five financial years from the end of the year in which the account was opened.

Can I transfer my PPF account from one bank to another or from one post office to another? Yes, it is possible to transfer your PPF account from one bank or post office to another.

Can I avail loan against my PPF account? Yes, a loan can be availed from the third financial year till the sixth financial year, subject to certain conditions.

Can I extend my PPF account after maturity? Yes, the PPF account can be extended for one or more blocks of five years each, after the maturity period of 15 years.

List of banks offering PPF account

There are several banks in India that offer Public Provident Fund (PPF) accounts. Some of the major banks that offer PPF accounts are:

State Bank of India (SBI)
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab and Sind Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank

It is important to note that PPF accounts can also be opened at post offices. It is advisable to check with the bank or post office to know the terms and conditions of the account and the interest rate they offer.