Things you should know about PPF Account | Public Provident Fund

PPF (Public Provident Fund) is a popular government-backed, the long-term small savings scheme. Deposits made in PPF account is completely risk-free because of the government backing. Many people are looking to open a PPF account but have some questions/doubts in their minds. In this article, I am going to try and clarify the most commonly asked question with regards to PPF account. Below are a few probable questions/answers to read before opening an account.

What is a PPF account?

PPF (Public Provident Fund) is a popular and one of the best long-term investment schemes with salaried as well as the self-employed class of individuals in India. PPF scheme was introduced by the Ministry of Finance in the year 1968. It offers risk-free returns with an attractive interest rate and interest earned on deposits are exempted from Tax. The deposits made in PPF can be claimed as tax deductions. This makes the PPF scheme one of the most tax-efficient instruments.

Who can open a PPF account?

Public Provident Fund account can be opened by resident Indian individuals (18 years or above) and individuals on behalf of minors (below the age of 18 years).

Who cannot open a PPF account?

NRIs (Non-Resident Indians) cannot open a Public Provident Fund account. If the account holders obtain NRI status after opening an account, then such account shall be deemed to be closed with effect from the day he or she becomes an NRI. The interest shall be paid at the rate applicable to the Post Office Savings Account up to the last day of the month preceding the one in which the account is closed”. Hindu Undivided Family (HUF) is also not eligible to open an account.

How to open a Public Provident Account?

Public Provident Fund Account can be opened at any nationalized, authorized bank and select post offices across India. It can also be opened at specific private banks as well. Public Provident Fund Account in most of the banks can now be operated online. These accounts can be opened by filling a form, submitting the required documents and depositing the minimum pay-in at authorized branches.

Can I open a Public Provident Fund Account online?

Although in most of the banks, you can operate your account online but opening a Public Provident Fund Account is still an offline process. You must fill up an account opening form and submit it along with the necessary documents to the bank.

What are the documents required for opening a PPF account?

Following documents are usually required for opening a Public Provident Fund Account:

1. Account opening form

2. Photograph (Passport size)

3. Identity proof

4. Residence proof

When does a PPF account mature?

A Public Provident Fund Account gets matured on completion of 15 years from the end of the year in which the account was opened.

What is the minimum and maximum amount that can be deposited?

An individual can open a Public Provident Fund Account with Rs. 100 but has to deposit the minimum of Rs. 500 in a financial year and maximum Rs. 1, 50,000.

How many deposits are permitted in a year?

The deposits into a Public Provident Fund Account can be made in a single lump sum or in any number of installments during a financial year. Previously it was 12 deposits in a financial year. However, now there is no such restrictions.

What is the rate of interest for PPF account?

The government of India decides the rate of interest for Public Provident Fund Account every quarter. The current rate of interest effective from 1 April 2020 is fixed at 7.1% per annum. Interest earned on amounts held in Public Provident Fund accounts is tax-free.

Can I maintain more than one PPF account?

At any point in time, you are allowed to maintain only one Public Provident Fund Account in your name. You can also open and maintain an account in the name of a minor child (below the age of 18 years).

Is nomination facility available for PPF account?

Yes, nomination facility is available for Public Provident Fund Account. You have to fill a nomination form at the time of opening an account to avoid difficulties for the nominee later on.

What are the tax benefits from investment in PPF account?

The investments in Public Provident Fund Account up to Rs. 1, 50,000 qualify for deduction under Section 80C of the income tax act. The entire maturity entire amount including the interest is non-taxable.

Can a PPF account be transferred?

Yes, a PPF account can be transferred from one authorized bank or post office to another. The transferred account will be considered as a continuing Public Provident Fund Account.

Can I transfer my PPF account to another person?

No, a Public Provident Fund Account is not transferable from one person to another even the nominee cannot continue the account of a deceased subscriber in his/her own name.

Is partial withdrawal from PPF account allowed?

Yes, partial withdrawals can be made from 7th year onwards subject to certain conditions. Only one partial withdrawal is allowed every financial year.

Can I avail loan facility against my PPF account?

Yes, loan facility can be availed against a PPF account, subject to certain terms and conditions. The loan can be taken only between 3rd to 6th financial years. The interest rate on the loan will be charged at 1% per annum.

Is premature closure of PPF account allowed?

Yes, the premature closure of the account may be permitted to deal with medical emergencies, higher education etc. This shall be allowed with a penalty of 1% reduction in interest on the whole deposit.

How can a discontinued PPF account be revived?

To revive a discontinued Public Provident Fund Account, you need to pay the minimum deposit of Rs. 500 with default fee of Rs. 50 for each defaulted year.

Can I continue my PPF account after maturity?

The Public Provident Fund Account holder can continue his/her account after maturity. The tenure can be extended for one or more blocks of 5 years each on written request within 1 year from the date of maturity. There can be two types of extention:

Extention without a contribution – The balance in the account will continue to earn interest at the prevailing rates till the account is closed. Also, in this case, any amount can be withdrawn without any restrictions once every financial year. Here you need to note that if your account is continued without contribution then you will not be allowed to make deposits again thereafter.

Extention with a contribution - The account holder can make deposits as earlier. In this case, withdrawal is restricted to a maximum of 60% of the balance at the beginning of each extended period is allowed.

What will happen in the event of the death of the PPF account holder?

In the event of the death of the Public Provident Fund Account holder, the balance amount in the account will be paid even before the completion of 15 years, to the nominee or legal heir of the deceased person. The nominee or a legal heir is not allowed to continue the account by making fresh subscriptions to it.

Why should I invest in PPF account?

Public Provident Fund Account is the safest saving instrument available as it is backed by the government of India. The amount invested, and the interest earned has a sovereign guarantee and returns are tax-free. The investments up to Rs. 1, 50,000 qualify for deduction under Section 80C of the income tax act. Now you don’t have to stand in queues for investments as in most of the banks you can now operate your account online.

Hope the above questions/answers are enough to get clarified your doubts about PPF account from all angles.

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