Public Provident Fund

Public Provident Fund, also known as a well-known long term sponsored by the Government of India. A good PPF offers substantial returns which are exempted from Income tax. Individuals and investors can decide the investment amount as per their capacity. An amount starting from Rs. 500 to Rs. 1, 50,000 in one financial cycle can get the facilities such as loan, withdrawal and extension of account.

What is the Eligibility for opening PPF account?

Today, opening a PPF account is simple, easy and unwieldy. A Public Provident Fund (PPF) account can be requested by Resident Indian individuals and Guardians to minors as well. Anyone can open a PPF Account online almost instantly, especially the existing customers.

How does one Open a PPF account?

A Public Provident Fund can be easily be opened with a Post office or any nationalized bank around the vicinity like the State Bank of India, Punjab National Bank, in addition to some private banks like ICICI, HDFC and Axis Bank. Not many banks are authorized to provide this facility. Individuals need to submit a fully filled up form in the authorized centers with relevant KYC documents like ID (identity proof), photo proof, and signatures. A requisite sum of amount needs to be deposited into the respective bank towards the opening of the account.

What is the likely Interest on PPF?

The prevailing interest rate is 7.6% that is calculated annually. The interest is determined every year which is given out on every 31st.This interest rate is set out every year, basis the last balance at the close of the fifth day and last day or every month whichever is more relevant.

Below are a few Features of PPF:

    • Time Period: A Public Provident Fund can have a minimum tenure of about 15 years , which can be further extended in a stretch of 5 years
    • Amount Limits: A public provident fund allows a minimum injection between Rs 500 to Rs.1.5 lacs in every financial year. The principle can be either made in one shot or installments of choice.
    • Opening of an Account:The account can be hit with as low as Rs 100 as the initial payment. Investments can be made above Rs.1.5 lac in one fixed financial year.  Anything over and above that threshold will be chargeable to tax and will not get interest.
    • Frequency: Deposit into the respective PPF needs to take place at least once every year for continuous 15 years.
    • Mode of Deposit: The required deposit into a PPF account can be done by cash, cheque, draft or online transfer.
    • Nomination: A designated PPF holder can appoint anyone as a nominee to his account at the time of closing or opening of the respective account.
    • Joint accounts: No joint account holders are allowed under PPF Only an individual can hold account under the PPF umbrella.
    • Risk factor: A public provident fund is fully supported by the Govt, it guarantees risk­-free returns and principle amount cover too.
    • Eligibility for PPF: Any Indian citizen can invest in a PPF. No outsiders are eligible for the same including NRIs and HUFs. The second account holder should not be a minor.
    • Loans against the Public Provident Fund: A loan amount can be taken upto 25% of the 2nd year immediately preceding the loan application year between the 3rd and 5th year.

Rules for PPF Withdrawal

One rule with respect to PPF would be that at the time of maturity (which is about 15 years), the total amount in the account can be withdrawn along with the due interest. This marks the closure of the account.

If at all the account holders want to withdraw before the designated 15 years, then partial withdrawals can be conveniently made on completing 6 years. A sum equal to 50% of the amount standing to the credit of the account at the end of the 4th preceding year in which the amount is withdrawn or at the end of the preceding year, whichever is lower can be withdrawn.

Broad tax benefits of Public Provident Fund PPF

PPF comes under the category of the Exempt-Exempt-Exempt (EEE) bracket. Essentially, all deposits made in the PPF are deductible under Section 80C of the Income Tax Act, 1981 . In Fact the interest amount is also tax deductible.