Public Provident Fund Scheme (PPF)

Public Provident Fund Scheme (PPF Account) is a popular investment option introduced by the ministry of finance, which offers attractive returns (which is completely exempted from tax) along with a reasonable safety.

An investor can start with a minimum investment of Rs 500 to a maximum of Rs 1,50,000 in a financial year and can avail other facilities like withdrawal, loan, and extension of the account.

The goal is to mobilize savings by offering an investment with a decent return along with income tax benefits.

Moreover, it aims to encourage savings amongst the masses and motivate them to create a retirement corpus.

What is Eligibility for opening PPF Account?

1. An individual, being an Indian resident and above 18 years can open only one account in his/her name. However, there is no upper age for opening the account.
2. A minor can also open a PPF Account but the maximum limit of Rs 1,50,000 per year applies collectively to minor and his guardian.
3. HUF, NRI and Foreigners cannot open the account.

What are the Key Features of PPF Scheme?

Some of the key features of PPF schemes are as follows-

1. Attractive Rate of Interest

It offers an interest rate of 7.6%, which is fully exempted from tax.

2. Long-term investment

One has to be invested for a time period of 15 years and it helps individual to accumulate a lump sum amount for the retirement.

Another Reading: 7 Government of India Schemes to Invest for Social Security

3. Low investment

You can start your investment from as low as Rs 500 and this encourages especially the poor masses to develop a habit of savings.

4. Withdrawal facility

Partial withdrawal options can be availed only from 7th year onwards.

5. Availability of loan

The facility of loan can be availed between the 3rd and 6th financial year of opening the account.

6. Extension of Account

One can extend his/her account in a block period of 5 years after the maturity.
What are the Benefits of investing in PPF Scheme?

What are the Benefits of investing in PPF Scheme?

1. Tax-free return

Investment in Public Provident fund (PPF) is completely exempted from tax.

2. Attractive long-term investment

It helps in fulfilling long-term goals with a deposit period of 15 years and lock in period of 7 years.

Moreover, it offers an effective return as compared to bank FDs and the interest rate is also compounded annually.

3. Easy accessibility

The account can be opened at post offices, public banks or selected private banks.

Another Reading: PPF account set to mature soon? Key things you should know

Moreover, you can open the account online as well.

4. Lower risk

There is a very low risk of default since it is government backed.

5. Suitable for retirement planning

It is suitable for building a retirement corpus, due to features like long-term tenure, tax-free return, compounding benefit and a better interest rate vis-a-vis bank FD.

6. No attachment

PPF funds can’t be attached under court order or laid claim to by creditors.
How to open a PPF Account?

One has to show KYC documents like address proof, identity proof, and signature proof.

You will need the following things to open the account-

1. PAN Card, Passport, Aadhar Card, Voter’s ID, Driving License, Employer’s letter, Utility Bill, Rental/Lease Agreement, Ration Cards.
2. Signed Cheque.
3. Bank Account Statements.
4. Photographs.
5. Account opening form along with nomination form.
6. Other necessary documents like minors birth certificate in case of minors.

Forms for PPF Account

There are various forms from A to H pertaining to PPF account, which are issued for some specific purpose.

Form A – This form is issued to open a new Public Provident Fund account.

It requires a key detail of the account holder like name, address, PAN card details etc.

Moreover, you need to specify the amount to be deposited.

Form B – This form is used to deposit or repay loans taken against a PPF account.

These pay-ins or deposits may be repayments, investments, loan taken against the account or penalties.

Another Reading: Top 5 investment options which will make you rich in India

One can deposit the amount through cheque, cash, internet banking, DD or PO.

Form C – This form is an application to withdraw a partial amount from PPF account.

The applicant is required to fill in the amount to be withdrawn and the account number.

Form D – The account holder can request a loan against the PPF account from the year 3 to 6 of an active account.

However, you need to mention the PPF account number, the amount to be borrowed along with an undertaking that you will repay the amount along with interest within 3 years according to the rules.

Form E – This form is filled to add a nominee to the account and you can add more than one nominee for a single account.

You have to mention the name of such persons, address and the relation you share with them.

Form F – It helps in making changes to the nomination information in the PPF account.

You can add or delete nominee from the PPF account any time during the entire tenure.

Moreover, you can also alter the percentage allocated to each nominee.

Form G – This form is used to claim funds in a PPF account by a nominee.

In case of demise of the account holder, the nominee or the account holder can claim the funds in their respective PPF account.

This form is to be filled along with details like the name of the legal heir/ nominee of the holder.

Moreover, it also asks for confirmation from the claimant about the attachment of the death certificate of the holder.

Form H – It is used to extend the time period for a PPF account beyond the maturity of 15 years.

Say if the holder wishes to extend the tenure beyond 15 years, the individual can do so for another 15 years by submitting this form.

Another Reading: Withdrawing, transferring your PF balance: These three mistakes can stop you

However, you need to specify the date of account opening and the account number.

How to calculate PPF interest?

A PPF calculator is a free tool offered online and it’s a great tool for those investing in the Public Provident Fund scheme.

It is often seen on the website of bank, post-office or third party service providers.

How to renew the PPF account?

The account holder has an option to extend the tenure beyond 15 years and it can be extended to a 5-year block with or without further investment.

1. Without fresh investment

The account holder will continue to earn interest on the accrued sum after the maturity.

Moreover, the individual is free to withdraw the sum freely once, every financial year.

2. With fresh investment

The additional investment made will be added to the overall fund and the interest calculation will be made on the total funds.

But the individual is restricted to withdraw a maximum of 60% of the funds held at the start of each 5-year period of extension.

How to withdraw PPF amount?

An individual cannot close the PPF account before maturity i.e. 15 years.

You cannot withdraw the funds before maturity even though the account becomes inactive.

The account can be closed and the entire sum can be withdrawn along with the interest accrued on completion of 15 years.

There is an option of a partial withdrawal of funds from the 7th year, but however, the amount to be withdrawn is lower of –

1. 50% of the overall balance at the end of the fourth year, counting from the year of withdrawal or
2. 50% of the total balance at the end of the year, before the year of withdrawal. However, withdrawals are to be made only once in a financial year.

Hope this article from The Finance Gyan helps!!!