Public Provident Fund Scheme

Public Provident Fund (PPF) scheme is a long term investment option which offers an attractive rate of interest and returns on the amount invested. It was introduced in India in 1968  by the Finance Ministry’s National Savings Institute with the objective to mobilize small saving in the form of investment, coupled with a return on it.

The only eligibility criteria to open a PPF account is that you must be a resident Indian citizen. A PPF account can also be opened in the name of an eligible minor.

One has to open an PPF account under this scheme and the amount deposited during a year will be claimed under section 80C deductions.

FEATURES OF PPF SCHEME

  • The minimum duration of a PPF account is 15 years. However, account holders can extend the duration of the account by a block of 5 years.
  • PPF allows a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh for each financial year. Investments can be made in lump sum or in a maximum of 12 instalments.
  • The PPF accounts cannot be held jointly, though you can make a nomination.
  • Under Section 80C of the Income Tax Act, all deposits made towards a PPF account are tax exempt.
  • The deposit into a PPF account can be made either by way of cash, cheque, Demand Draft or through an online fund transfer.

INTEREST RATES ON PPF ACCOUNT

The interest payable on public provident fund scheme is determined by the Central Government of India. The interest is calculated on the lowest balance between the close of the fifth day and last day of every month.

Interest rates currently payable on such accounts stands at 7.1%, and is subject to quarterly updates at the discretion of the government.

HOW TO OPEN A PPF ACCOUNT ?

A PPF account can be opened with either a Post Office or with any nationalized bank like the State Bank of India or Punjab National Bank, etc after filling a form and submitting the following documents-

  • KYC documents verifying the identity of an individual, such as Aadhaar, Voter ID, Driver’s License, etc.
  • PAN card.
  • Residential address proof.
  • Form for nominee declaration.
  • Passport sized photograph.

WITHDRAWAL FROM PPF ACCOUNT

Funds can be withdrawn fully from the PPF account only upon the maturity i.e after completion of 15 years which is tax free .

However, the account holder can make premature withdrawals in case of need of funds at the start of the 7th financial year up to a maximum of 50% of the amount that is in the account at the end of the 4th year (preceding the year in which the amount is withdrawn or at the end of the preceding year, whichever is lower).

Thus, in a nutshell, the Public Provident Fund (PPF) scheme is a saving-cum-tax-saving instrument introduced by the Ministry of Finance’s National saving Institute with the purpose of mobilizing the savings by providing reasonable interest coupled with tax benefits.

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