What is PPF?

Public Provident Fund (PPF) is considered a popular investment tool by many. The reason being the tax benefit it offers come under the Exempt-Exempt-Exempt (EEE) tax status. This precisely means that the amount is exempt from tax at the time of investment, the interest earned on the investment is exempt from tax, and the maturity proceeds also are exempt from tax. Tax exemption can be claimed under Section 80C of the Income Tax Act.

The main motive to introduce the Public Provident Fund Scheme by the Ministry of Finance in the year 1968 was to popularise small savings in the form of an investment which would earn good returns while getting a tax exemption.

What is the Ongoing PPF Interest Rate?

The PPF interest rates are set by the Central Government. Earlier the interest rates were set on a yearly basis but from the FY 2017-18 onwards it is being set on a quarterly basis, i.e., once in 3 months. The current PPF interest rate, i.e., for the quarter of April 2019 to June 2019 (FY 2019-20) is 8%. The interest rate for the earlier quarter i.e., January 2019 to March 2019 (FY 2018-19) also was 8%.

The PPF interest is compounded annually. That means the interest earned during the previous year will be considered for interest calculation in the current Financial Year. For e.g., if you have made an investment of 1,00,000 during the FY 2018-19, the interest earned on the investment will be 8,000. The base amount for interest calculation for the next Financial Year will be 1,08,000 and so on.

The PPF interest is calculated on the lowest balance from the 5th of a month to the end of the month. So, if you are going to make any deposit to your PPF account, it should preferably be made by the 5th of that month to earn interest for the month.

For e.g., if you want to make a deposit in the month of January and earn interest for the month of January, you should make the deposit essentially by the 5th of January. Even if you make the deposit on the 6th the deposit will not earn any interest for the month of January. It will be considered for interest calculation only from the month of February.

During the year 2018, the PPF interest rates fell from a peak of 8.8% to 7.6%. However, the interest rate for the quarter of April 2019 to June 2019 is at 8%.

The PPF rate was fixed at 12% from the year 1986 to the year 1999 and that was the highest rate offered.

Key Features of PPF Account

The Key features of PPF Account are as detailed below:

  • Investment limits: The investment limit for PPF account is a minimum of 500 and a maximum of 1.50 Lakhs. The investment can either be made in bulk or in instalments. The maximum number of times deposits allowed is 12 in a financial year.
  • Opening balance: The PPF account can be opened with a minimum balance of 100. Any amount over and above 1.50 Lakhs will not earn interest and will not be eligible for tax benefits.
  • Tenure: The minimum tenure for PPF account is 15 years which can be extended in a block of 5 years.
  • Frequency of deposit: Deposit in the PPF account should be made once every year for 15 years.
  • Mode of deposit: The deposit to the PPF account can be made by way of cash, cheque, demand draft, or through online transfer.
  • Nomination: Nomination facility is available for the PPF account. The nominee can be designated either at the time of opening the account or subsequently.
  • Joint accounts: PPF account can be held only in an individual name. The account cannot be opened in joint names.
  • Risk factor: Since the PPF account is backed by the Indian Government, it offers complete capital protection along with guaranteed returns. The risk involved in the investment in PPF is minimal.
  • Premature closure: Premature closure of PPF account is not allowed. The account can be transferred from one bank to another bank or the post office. Partial withdrawal is allowed in the account.

How is the PPF Interest Calculated?

The PPF interest is calculated on the lowest balance from the 5th of a month to the end of the month. So, if you are going to make any deposit to your PPF account, it should preferably be made by the 5th of that month to earn interest for the month.

For example, if you want to make a deposit in the month of January to earn interest for the month of January, you should make the deposit essentially by the 5th of January. Even if you make the deposit on the 6th the deposit will not earn any interest for the month of January. It will be considered for interest calculation only from the month of February.

How to Open a PPF Account?

You can open a PPF Account in a Nationalised Banks, Major Private Banks, and Post Office. In major private banks like ICICI Bank and Axis Bank the PPF account can be opened online through internet banking. Once the account is opened, a passbook will be issued. All the subscriptions, withdrawals and interest collected are recorded in the passbook. Some banks allow viewing of the statement online.

For opening a PPF Account a duly filled application form along with Photo ID Proof, Address Proof, Photograph of the applicant and Nomination form has to be submitted either at the banks or the post office.

The PPF Account opening form, Form A can either be downloaded online or can be obtained from the designated bank branches or the post office.

Eligibility to Open a PPF Account

  • A PPF Account can be opened by any resident individual
  • A PPF Account can be opened by the parent in the name of the minor
  • Multiple accounts cannot be opened unless the second account is opened on behalf of a minor
  • A PPF Account cannot be opened in joint names
  • Non-Resident Indians (NRIs) and Hindu Undivided Family (HUF) are not eligible to open a PPF Account.
  • If a resident becomes NRI after opening the PPF account, he or she is allowed to continue the account until maturity.

When Does the PPF Interest Get Credited to the Account?

Though the PPF interest is calculated on a monthly basis the interest is credited on the 31st of March every year. For instance, the interest calculated on a monthly basis from April 2018 to March 2019 will be credited to the account on the 31st of March 2019.

PPF Interest Rates over the Last 5 years

PPF interest rate over the last 5 years is as given below:

Period % of Rate of Interest

April 2012 to March 2013

8.7

April 2013 to March 2014

8.7

April 2015 to March 2016

8.7

April 2016 to June 2016

8.1

July 2016 to September 2016

8.1

October 2016 to December 2016

8

January 2017 to March 2017

8

April 2017 to June 2017

7.9

July 2017 to September 2017

7.8

October 2017 to 26thDecember 2017

7.8

27th December 2017 to March 2018

7.6

April 2018 to June 2018

7.6

July 2018 to September 2018

7.6

October 2018 to December 2018

8

January 2019 to March 2019

8

April 2019 to June 2019

8

Banks Offering PPF Account

Public Sector Banks Offering PPF Account

  • Allahabad Bank
  • Union Bank of India
  • Central Bank of India
  • Indian Bank
  • United Bank of India
  • Bank of Maharashtra
  • IDBI Bank
  • Bank of India
  • Bank of Baroda
  • State Bank of India
  • Syndicate Bank
  • Syndicate Bank
  • Oriental Bank of Commerce
  • Canara Bank

Private Sector Banks Offering PPF Account

  • HDFC Bank
  • ICICI Bank
  • Axis Bank

Top Banks That Do Not Offer PPF

  • DBS Bank
  • RBL Bank
  • Citibank
  • Yes Bank
  • Standard Chartered Bank
  • Kotak Mahindra Bank
  • Federal Bank
  • Bandhan Bank
  • IDFC Bank
  • South Indian Bank
  • IndusInd Bank
  • Karur Vysya Bank

PPF Declaration in ITR and Taxation on PPF Interest

There is tax exemption for interest on PPF. However, it has to be declared in Income Tax Returns (ITR) while filing the return. The details of interest paid earned for a particular Financial Year can be got from the PPF Account passbook or can be got from the account statement available online.

PPF Interest Rates for Special Categories

  • PPF Interest Rate for Senior Citizens

    There is no preferential interest rate offered for PPF Accounts opened by Senior Citizens. Their PPF Account will earn the same interest as the regular account.

  • PPF Interest Rate for Minors

    A parent/legal guardian can open a PPF Account on behalf of the minor. However, the collective deposit made to both the accounts should not exceed 1.50 lakhs. The parent cannot deposit 1.50 Lakhs to each of the accounts. It can though be 1 Lakh to one account and 50,000 for the other account. There is no preferential rate to the PPF account opened on behalf of the minor. The interest earned will be the same as a regular account.

  • PPF Interest Rate for NRIs

    NRIs are not eligible to open a PPF Account, but if the resident Indian has opened the account before the change of the status, the same can be continued for 15 years, i.e., till maturity. However, there will be no preferential offered. The account will earn the same interest as regular PPF account.

Claiming the PPF after the Account Holder's Death

The proceeds of the PPF Account can be claimed by the nominee or the legal heirs by following the procedure detailed below.

  • If the PPF Account holder had registered valid nomination, the nominee will be able to claim the proceeds from the account by filing the Form G along with the death certificate of the account holder.
  • If no nomination is registered, the legal heirs can claim the proceeds from the account by filing the Form G and submitting a succession certificate or letters of administration along with an attested copy of the probate of will issued by a competent court in addition to the death certificate of the deceased.

If the balance in the account is up to 1 Lakh the claim may be made by filing Form G along with:

  • A letter of indemnity
  • An affidavit
  • A letter disclaimer on the affidavit
  • A certificate of death of deceased

Transferring a PPF Account

  • If you are transferring the PPF Account within the same bank branch or post office the process is not elaborate. You have to visit your existing branch or post office and submit an application to change the branch. The process may take up to seven days depending upon the bank or post office branch.
  • If you want to transfer the account from a bank to post office or vice versa or from one bank to another bank, the procedure to be followed is detailed below:
    • Go to your existing branch/post office along with your PPF passbook
    • Submit a transfer application request. In the application form, you will have to mention the full address of the post office/bank branch where you want to transfer the PPF Account to.
    • Upon receiving the PPF transfer application request, the existing branch will start the process. Collect acknowledgement of the transfer request. The existing branch will send the documents mentioned below to the new branch.
      • Certified copy of the account
      • Original account opening application form
      • Nomination form
      • Your specimen signatures
      • A cheque or demand draft for the outstanding amount
      • Existing PPF passbook
  • You will be intimated about the receipt of the documents from the old branch by the branch officials.
  • You will be required to submit the fresh account opening form, change of nomination form if any, and the original passbook to the new branch.
  • You might have to comply with the KYC process again. So, carry your ID proof, Address Proof and Aadhaar Card when you go the new branch.

How is PPF Interest Determined after Maturity?

The PPF interest rates on maturity are the average of all the interest that has been declared in all the years when the account was operational. If the PPF rate on maturity is 8% but the interest declared in the previous years was 7% then the interest rate on maturity of the account will be the average of the two rates.

Calculation of PPF Interest Using PPF Calculator

  • PPF Calculator calculates the maturity amount and the interest earned based on the type of investment made (fixed or variable).
  • You are required to choose the type of deposit (fixed or variable amount) and the amount deposited every year.
  • Assuming that the amount is deposited on the 1st of April every year the interest is calculated for the financial year based on the prevailing interest rate.
  • An estimate of the investment made by you until a particular year will also be arrived at by the PPF Calculator.

Frequently Asked Questions on PPF

What are the minimum and the maximum that can be deposited in PPF Account?

You can deposit a minimum of 500 and a maximum of 1.50 Lakhs in the PPF Account in a financial year.

What is the tenure of a PPF Account?

The maximum tenure for a PPF account is 15 years.

Can the tenure be extended after the lock-in period of 15 years?

Yes, the tenure can be extended in blocks of 5 years as long as you wish.

Is nomination facility available for the PPF Account?

Yes, nomination facility is available for the PPF Account.

Who can open a PPF Account?

A PPF Account can be opened by Resident Indians. NRIs are not eligible to open the account. However, if a resident has opened the account before the change of status, the same can be continued until maturity. A parent/legal guardian can open a PPF Account on behalf of the minor.

Where can the PPF Account be opened?

PPF Account can be opened at designated Private Sector and Public Sector banks and also at Post Offices.

Is transfer of the account from a bank to a post office and one bank to another bank permitted?

Yes, transfer of the account from a bank to a post office and one bank to another bank is permitted.

Can a loan be availed on PPF Account?

Yes, a loan can be availed on PPF Account.

Is pre-mature closure of a PPF Account allowed?

No, PPF cannot be closed before maturity. However, part-withdrawal in the account is allowed.

Is Tax Benefit available for the account?

Yes, tax benefit under Section 80C of the Income Tax Act is available for the account. The invested amount, the interest earned and the maturity amount are all exempted from tax.

OTP is sent to your mobile number

Enter OTP

Resend OTP

×

Get Personal Loan up to 40 Lakh Chat
& get instant approval