In 1968, the National Savings Institute introduced the PPF scheme. The Public Provident Fund (PPF) is one of the most popular and safest long-term tax savings scheme in India. The main objective of the PPF scheme is to help individuals make small savings and start investing with minimum of Rs. 500/- and provide return on the savings. The PPF scheme has a minimum lock-in period of 15 years and offers an attractive interest rate of 7.1% p.a., wherein no tax is required to be paid on the returns earned from the interest rate.
|Interest Rate||7.1% per annum|
|Tenure||15 years (can be renewed)|
|Eligibility||All Indian citizens|
|Minimum Investment Amount||Rs. 500/-|
|Maximum Investment Amount||Rs. 1.5 lakh|
|Tax Benefits||Up to Rs. 1.5 lakh u/s 80C|
The following are some of the important features of the Public Provident Fund (PPF) scheme:
The PPF offers a better alternative to traditional low-risk investments. Its interest rates are usually higher (7.1% p.a.) than interest from accounts in commercial banks.
Investments made in a PPF account are eligible for tax deductions under Section 80C of the Income Tax Act. The second tax benefit is the tax-free interest from a PPF Investment. Thirdly, its maturity proceeds are also tax-exempt.
Individuals are required to hold on to their PPF accounts for at least 15 years. After crossing this threshold, they can choose to extend their holding period indefinitely by blocks of 5 more years.
Individuals can hold only one PPF account in their name. However, they can open a second account on behalf of a minor.
To have a PPF account, an individual needs to be an Indian citizen. Moreover, minors can hold a PPF account in their name, but their parents must manage the account on the minor’s behalf.
Minimum investment amount is Rs. 500 and the maximum amount for tax benefits is Rs. 1.5 lakh in a financial year. You can choose to invest in instalments or in a lump sum. Making constant payments is important to keep the account active.
Investors can deposit funds in their PPF account via demand draft, cash, cheque and online payment gateways.
Individuals investing their money in instalments can make up to 12 instalments in a year. Furthermore, they must make at least one deposit of at least Rs.500 every year throughout the 15-year tenure to keep a PPF account active.
Investors with a PPF account can take a loan against their PPF account from the third or fifth year of holding their account. The loan amount they will be eligible for cannot be more than 25% of the investment made in the second financial year. Investors can also take a second loan from the sixth year after paying back the first loan amount.
Since the Government of India guarantees the returns of the Public Provident Fund scheme, the risks involved are negligible. Therefore, this is considered to be one of the safest investment options for capital protection and tax savings.
Below are a few factors that you should take into consideration before you start investing in PPF:
As stated previously, the PPF balance comes under the EEE category. With no wealth tax or taxes on the deposits or interest amount, account holders can acquire the complete amount at maturity.
Even if you are ineligible for partial withdrawal, you can look for loans against your balance between the third and sixth years.
An individual can start investing in PPF online with just Rs.500. This allows people from economically challenged backgrounds to invest and earn hefty interest at maturity.
The investments in PPF are not impacted by market conditions. Accordingly, it is a suitable option for risk-averse individuals looking to save tax and earn returns at the same time.
As per a circular dated September 30, 2021, India’s Finance Ministry declared that PPF accounts would continue to generate 7.1% interest, compounded annually. You can expect the interest to get deposited into your account by the end of March every year.
The calculation of interest is simple. Banks consider the lowest balance in your PPF account between the end of the fifth day and each month’s last day.
Time Period (Years)
Rate of Interest (2022)
There are two ways you can open a PPF account – online and offline. The sections below discusses the steps of opening PPF account online and offline:
The online process of opening a PPF account online involves the following steps:
The following documents are required while opening a PPF account:
Form C is used for PPF withdrawal under certain circumstances. These circumstances include a child’s education, wedding or medical emergencies. However, individuals can withdraw the money only after 6 years from the opening date of the account. Form C is important because it allows the individual to withdraw only the partial amount from the PPF funds instead of withdrawing the entire corpus.
PPF is a popular investment option as it offers guaranteed returns, attractive interest rates and tax benefits. It is one of the few investment options in India to have triple tax exemption status, also called EEE (exempt-exempt-exempt) status. In other words, you can get tax benefits at the time of investment, accrual and withdrawal.
All deposits made to a PPF account are eligible for income tax deduction under Section 80C of the Income Tax Act. The income tax deduction is limited to Rs. 1.5 lakh in a financial year. In the case of deposits made by minors, their parents can claim deductions under Section 80C subject to Rs. 1.5 lakh limit in a financial year.
Furthermore, the accumulated interest from PPF deposits is also exempt from tax at the time of withdrawal. PPF offers relatively high-interest rates among government-backed fixed-income products. This combination of tax benefits, security, and returns makes it an attractive investment option.
Finally, the amount after maturity is also completely tax-free at the time of withdrawal. Wealth tax is not applicable on PPF accounts and proceeds. Even the amount withdrawn prematurely from a PPF account is exempt from taxes.
You will receive your entire interest earnings from PPF after 15 years of investment. An individual can close his/her PPF account prematurely only under special circumstances:
You can make partial withdrawals after a certain time of investing in a PPF account and full withdrawals after 15 years. If you wish to know the steps for withdrawing money from your PPF account, these are stated below:
In order to link your PPF with your Aadhaar, follow the steps below:
You can transfer your PPF account from a bank to a post office or vice versa. You can also initiate such a transfer within the same bank when you intend to change your deposit branch.
In either case, here is the complete process for such a transfer:
Following the steps below to check your PPF account balance online:
In order to reactivate the inactive PPF accounts one needs to follow these steps:
These are some of the commercial banks where you can open a PPF account:
There are no specific due dates when you can deposit money in a PPF account. But if you wish to maximise your returns from your PPF investments, experts suggest investing the corpus between the 1st and 5th of April of a financial year.
Individuals who do not have the means to make a lump sum payment can invest in instalments within the 5th of every month. The minimum amount one can deposit in a year is Rs.500. There are no maximum limits, but deposits above Rs.1.5 lakh are not eligible for tax benefits.
If the parents opened a PPF account when the child was a minor, they need to convert the account into an individual account when the child attains the age of 18.
For conversion of a minor PPF account, individuals have to visit the bank or post office where the child has the PPF account and submit the following documents:
After the submission of all the above-mentioned documents, the bank will review them. Furthermore, the bank or post office will provide the individual with a newly issued passbook for opening the PPF account.
Whether you are looking for an early withdrawal or closing your PPF account after maturity, here is the distinct procedure you need to follow:
You can avail of a loan against your PPF balance. However, to do so, you must meet certain specific conditions. These are as follows:
Individuals cannot attach any court order or decree to their PPF account to settle unpaid obligations or debts. However, Income Tax authorities are exempted from such restrictions, and they are allowed to access the debtor’s PPF account.
The IT department has the power to use the subscriber’s PPF balance to pay off any tax-related orders.
The popularity of PPF is apparent with each passing year. Its safety and long-term financial benefits make it an appealing option for individuals of all ages. You can create a retirement corpus or use the amount to aid your children’s education, marriage or any other take care of any other financial need. Moreover, you can also save tax by investing in it in instalments or in a lump sum. You can also partially withdraw the PPF amount to meet any urgent and sudden requirements. In case you do not meet the eligibility criteria for partial withdrawal of the PPF amount, you can get cash loans at attractive interest rates in a 100% paperless manner. Just download the Navi App and apply now!
Ans: Individuals can deposit up to Rs.1.5 lakh in a PPF account in a financial year to be eligible for tax deductions. This they can either pay as a one-time investment amount at the beginning of the financial year or pay in 12 instalments.
Ans: There is no age limit to open a PPF account. However, individuals who are under the age of 18 are considered minors, and they cannot operate the account on their own. So, their parents or legal guardians will have to operate the account on their behalf.
Ans: Individuals are not allowed to have more than one PPF account under their name. However, an adult can operate a PPF account on behalf of their minor child.
Ans: The only document that you need to submit to apply for your PPF withdrawal is Form C. Alongside Form C, you may have to enclose your PPF account passbook.
Ans: Once individuals open their PPF account in a post office or bank, they are provided with a passbook that contains the PPF account number. If the individual has opened the account online, the PPF account number will appear on the screen after the completion of the account opening process. The person needs to note down the number or take a printout for future reference.
Moreover, one can also visit the net banking portal and click on the PPF account on that portal. There, the individual will find the account number.
Ans: Individuals can hold only one PPF account under their name. However, a person can operate his minor son’s account on his/her behalf.
The tax exemptions you will receive will only be up to Rs.1.5 Lakh per year under Section 80C. So the investment you make under your name and your son’s PPF account should not exceed the threshold of Rs.1.5 lakh to be eligible for tax benefits.
Ans: There is no such mandate where you have to withdraw your PPF balance after maturity which is 15 years. Individuals can keep the amount in their account so that it can continue to accumulate interest till the time they decide to close the account.
Ans: PPF accounts have a lock-in period of 15 years before which an investor cannot withdraw the entire amount from their PPF account. After 15 years, one can choose to extend your account maturity by 5 years without making further contributions.
Ans: There is no such limit up to which one can extend the PPF account. Individuals are allowed to extend the PPF account in blocks of 5 years after they have held onto the account for 15 years.
Ans: Yes there is a minimum lock-in period for PPF accounts. Individuals need to hold the account for a minimum of 15 years.
Ans: Individuals can nominate one or more people in their PPF accounts. However, they cannot nominate a minor. A nominee under the PPF account can be the individual’s spouse, children (above the age of 18), and parents.
|Section 145A||Section 80P||Section 92CD|
|Section 281||Section 32(2)||Section 270A|
|Section 1399||Section 192A||Section 11|
|Section 35AD||Section 80C||Section 32|
|Section 206AA||Section 92E||Section 9|
|Section 153||Section 10(10D)||Section 194DA|
|Section 10AA||Section 80GG||Section 80TTB|
|Section 80JJAA||Section 1940||Section 23B|
|Section 206AB||Section 44AB||Section 87A|
|Section 115JB||Section 154||Section 194D|
|Section 194J(1)(ba)||Sectio 80U||Section 194K|
|Section 56-59||Section 80TTA||Section 234C|
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