PPF

PPF(Public Provident Fund) is a government-backed investment plan floated in the interest of the public. PPF is a very good retirement plan as it helps individuals in building a corpus for their retired life while earning good returns along with tax benefits. The maximum investment that can be made under the PPF scheme is Rs. 1.50 lakhs. A tax benefit is provided under Section 80C of the Income Tax Act 1961 for the investment of up to Rs. 1.50 lakhs under the scheme.

What is a PPF account?

PPF account is a government-backed savings scheme introduced with an intention to inculcate the habit of small savings. This long-term savings scheme that matures after a period of 15 years enables individuals to build a huge corpus that comes in handy after retirement. The three major factors i.e., safety, tax benefit as well as attractive returns have made the scheme the most sought after scheme, especially by the small savers.

Yet another attractive feature of the scheme is the exemption of tax on the investment, maturity proceeds and the interest earned. It is classified as EEE under the category for tax implication.

PPF Details

The details of the PPF account are as given below.

  • Any Indian citizen can open a PPF account. There is no restriction of age to open a PPF account. The account can be opened with a minimum deposit of Rs.100.
  • The minimum deposit to the PPF account in a financial year is Rs. 500 and the maximum amount is Rs.1.50 lakhs.
  • The tenure of the PPF account is 15 years.
  • The principal, interest and the maturity amount of the PPF account are not taxable.
  • The interest rates for the PPF account are decided by the Finance Ministry. The rates normally are revised quarterly. The interest rates of the PPF account have fluctuated between 7.60% to 8.00% in the past. The details of the interest rate fluctuations in the PPF account are given below.
Rate period    PPF interest rate
January 2017 to March 20178%
April 2017 to June 20177.90%
July 2017 to September 20177.80%
October 2017 to December 20177.80%
January 2018 to March 20187.60%
April 2018 to June 20187.60%
July 2018 to September 20187.60%
October 2018 to December 20188%
January 2019 to March 20198%
April 2019 to June 20198%
July 2019 to September 20197.90%
October 2019 to December 20197.90%
January 2020 to March 20207.90%
April 2020 to June 20207.10%
July 2020 to September 20207.10%
October 2020 to December 20207.10%
January 2021 to March 20217.10%
April 2021 to June 20217.10%
July 2021 to September 20217.10%

Features of a PPF Account

The features of a PPF Account are as given below:

  • Only resident Indians are permitted to open the account. In case the account is opened before a change in the resident status, the account can continue till maturity. The account should necessarily be closed on maturity as an extension in blocks of 5 years will not be permitted once the individual becomes an NRI. 

The PPF account can be opened in the name of minors but the operations in the account should be by the parent.

  • The minimum and maximum annual investment in the account should be Rs. 500/- and Rs. 1.50 lakhs respectively.  Any investment made over and above Rs. 1.50 lakhs will not earn interest and will not be eligible for any tax benefit.
  • A maximum of 12 deposits is permitted in a financial year. Even a lumpsum investment of Rs.1.50 lakhs in a financial year is permitted.
  • Deposits should be made year on year without a break to keep the account live.
  • A facility to avail loan against the investment is provided. But the loan should be availed between the 3rd and the 6th year. A maximum of 25% of the total balance available in the account will be permitted. The loan has to be repaid within 3 years.
  • The rate of interest applicable for investment in the PPF account is determined by the Finance Ministry. At present, the PPF interest rate is 7.10%. The interest rate is subject to quarterly updates and the discretionary authority is the Finance Ministry.
  • The deposit into the account can be made either by way of cash, cheque, demand draft or online transfer of funds.
  • Nominee registration for the account can be made either at the time of opening the account or subsequent to opening the account.
  • It is not possible to open PPF account in joint names.
  • The risk factor for the investment made in the PPF account is almost nil as it is backed by the government.

How to open a PPF Account?

You can open a PPF Account either in a post office or in any of the nationalised banks. At present some of the private banks like Axis Bank, HDFC Bank and ICICI bank are designated to open the PPF account.

A PPF account can be opened only by resident Indians. Even a minor is eligible to open the account provided the account is operated by the parent. The account opened by a Non-Resident Indian before the change of the resident status can continue till maturity. However, the account should mandatorily be closed on maturity as further extensions are the privilege extended to resident Indians only.

The account can be opened by submitting a duly filled application prescribed for the purpose along with the following  KYC documents.

Residence Proof: Aadhar Card, Voters’ ID Card, Passport, Driving Licence (Any One)

Photo ID Proof: PAN Card, Passport, Aadhar Card, Voter’s ID Card, Driving Licence (Any One)

Signature Proof: PAN Card, Passport. Driving Licence (Any One)

The account can be activated by making an initial deposit. The account can be activated with a deposit of Rs. 100/-

Interest Rate on PPF

The authority determining the PPF interest rate is the Finance Ministry. The PPF interest rate is revised every quarter and the determining authority is the Finance Ministry. 

The interest rate for the existing quarter i..e, July 1st, 2021 to September 30th, 2021 is 7.10%.  Interest applied on the PPF investment will be compounded yearly. 

The interest will be paid on the 31st March of every Financial Year. 

The base amount for interest calculation will be the lowest balance between the 5th and the last day of the month.

Returns on the investment in the PPF account can be calculated using the PPF calculator available online before making the investment.

Eligibility to invest in PPF

Individuals who comply with the following criteria qualify to invest in PPF.

  • Should be a resident Indian. If an account is already existing before the change in the resident status, the account can continue till the completion of the tenure and thereafter should be closed. No further extension will be permitted for such accounts.
  • Each individual can have only one account unless the other account is in the name of a minor.
  • The PPF account is possible to open in a minor's name with the parent as the operating authority.
  • There is no PPF allowed for HUFs and NRIs.

PPF withdrawal

The investment made in the PPF account will have a lock-in period of 15 years. As per the PPF withdrawal rules, withdrawals can be made in the account only after the completion of 15 years i..e, on maturity. Individuals who intend to continue the account beyond 15 years can opt for extension in blocks of 5 years either with further deposits or without further deposits.

In case of a dire need of funds, partial withdrawals are permitted in the account only after the completion of 5 years. The maximum amount that is allowed for partial withdrawal is 50% of the balance in the account, as seen at the end of the 4th financial year or the balance as seen at the end of the preceeding financial year when the amount is withdrawn, whichever is lower.  Only one withdrawal in a financial year will be permitted.

Premature closure of the account is also permitted with end-use restrictions after the account has completed a min 5 years from the date of opening. The amount so withdrawn should be for the following purposes.

  • For the treatment of the account holder or the spouse, parents or minor children of the account holder suffering from critical illness.  Relevant medical bills and reports as documentary proof should be submitted along with Form C.
  • For higher education of minor children with documentary proof by way of related receipts and enrolment certificates from recognised universities/colleges. 
  • When the account holder's status changes from resident to Non-resident.

A loan to the extent of 25% of the available amount can be availed between the 3rd and the 6th year from the date of opening the account.

All requests for withdrawal should be made by submitting Form C along with a copy of the PPF passbook.

Process of PPF withdrawal

The following process has to be followed for withdrawals in the PPF account.

  • You can make a request online through the net banking facility wherein you can view your PPF account to know the partial or complete withdrawal eligibility.
  • You can also fill Form C with the relevant details and submit the same to the bank branch or the post office where the PPF account is maintained.
  • After scrutinising the eligibility the bank/post office will credit the amount to the bank account mentioned in Form C.

Premature closure of PPF Account

As per PPF withdrawal rules, any withdrawal in the PPF account can be done only on completion of the tenure i.e., 15 years. Premature closure is however permitted under the following circumstances.

  • When the account holder or the parents, spouse or minor children of the account holder is suffering from a terminal disease and the funds are required for the treatment. The closure request has to be accompanied by valid proof like medical bills, reports etc.
  • When the account holder or minor children of the account holder want to pursue higher education and the funds are required for admission and other related expenses. Proof of admission to the course like enrolment certificate and fee receipts have to be submitted.

Premature closure will be permitted with a penalty by way of a reduction in the rate of interest by 1%. The returns on the investment done so far will be reduced to that extent.

How do you close a Public Provident Fund Account?

On completion of the tenure i.e., 15 years, you can either close the account and withdraw the amount fully or opt for an extension of the account in blocks of 5 years. If you wish to close the Public Provident Fund Account, you will have to submit a written application along with the original passbook to the bank branch or the post office where the PPF account is maintained.

Bank details for crediting the proceeds should be mentioned. Address proof, Photo ID proof a cancelled cheque of the account to which the proceeds have to be credited should also be submitted.

The bank/post office will verify the completion of the lock-in period. If the account has completed the lock-in period, the account will be closed and the proceeds credited to the bank account mentioned in the request letter.

PPF (Public Provident Fund) FAQs

When can I withdraw my PPF?

PPF is a long-term investment with a lock-in period of 15 years. You can withdraw the PPF only after the completion of 15 years.

How to check the PPF account balance?

There is a provision to check the PPF account balance both offline as well as online.

Online checking of PPF Account Balance

You will be able to check the PPF Account Balance online only if you have the PPF account with the Bank. To check the account balance, you should keep the following points in mind.

  • Banks normally open PPF Accounts for individuals who are already customers of the bank and are maintaining an account with the bank. It is mandatory for the PPF account to be linked with the bank account to view the details of the account online.
  • You should have the internet banking facilities registered for your bank account.
  • You can view the details of the PPF account along with the details of other accounts by logging in to the netbanking account using the login credentials.
  • After logging in you can check the PPF account balance.
  • You can also download the PPF account statement, transfer funds to the PPF account, register standing instructions for the PPF account, and submit an online PPF loan application.
  • Online services offered by the bank are subject to periodical changes.

Offline checking of PPF Account Balance

On opening a PPF Account, the bank/post office provides you with a passbook. The passbook contains details of the PPF Account like PPF Account number, the bank branch, account balance, credits and debits to the account, and total balance.

You can visit the bank branch/post office and get the passbook updated periodically. By doing so you ls will have the up to date details of the PPF Account.

How many times the PPF account can be extended?

There is no restriction on extending the PPF account. You can extend the account any number of times, but it should be only in blocks of 5 years. The account cannot be extended further before completing the five years block.

Can a Senior Citizen open a PPF Account?

There is no restriction on the age of opening a PPF Account. Any citizen of India can invest in the PPF account to avail of the benefits.

How to transfer funds from PPF Account to a bank account?

To transfer funds from PPF Account to a bank account, you should either approach the bank or the post office where the PPF account is maintained and submit Form C along with a copy of the passbook. Form C will contain all details like the amount to be transferred, the PPF account number, the number of years elapsed since the opening of the account, the date of the previous transfer, details of the bank account to which the amount has to be transferred. After scrutiny, the post office or the bank will credit the amount to your bank account.

Can I close my PPF account before five years?

The rules governing the PPF withdrawal permit premature closure of the PPF account only on completion of 5 years from when the account was opened, i.e., only during the 6th year. Hence, you will not be able to close the PPF account before five years.

How to withdraw PPF account money?

Essentially you will not be able to make any withdrawals from the PPF Account before the completion of 15 years. But in exceptional cases, partial withdrawal will be permitted after the completion of 5 years from the date of account opening. For this, you will have to submit a completed Form C that contains the details of the amount that has to be withdrawn as well as the details of the bank account to which the amount has to be credited among other details. You will have to enclose a copy of the passbook while submitting Form C to the bank/post office.

How to deposit money in a PPF account?

You can deposit money into a PPF account either by way of cash, cheque, DD or transfer the amount through an internet banking facility.

Is PPF maturity amount taxable?

No. the PPF maturity amount is not taxable.

Which bank is best for the PPF account?

Earlier PPF account could be opened only in a post office. At present, most public sector banks and a few private banks offer to open the PPF account. You can choose to open an account based on the quality of customer service or in a bank where you have a savings bank account.

How many times am I allowed to extend the PPF account in blocks of 5 years?

There are no restrictions for the extension of the PPF account in blocks of 5 years. It can be extended as many times but only in blocks of 5 years.

When to deposit money into a PPF account?

There is no due date specified for the deposit of the amount into the PPF account. But it is recommended to deposit the amount between 1st April and 5th April of every financial year to avail maximum benefit.

How to withdraw an amount from a PPF account before maturity?

You will not be allowed to withdraw the amount from a PPF account before the completion of 15 years. Under special circumstances, when you are in great need of funds, you will be able to withdraw the amount but only after the completion of 5 years from the date of account opening. You will have to submit a duly filled Form C along with a copy of the passbook to the bank or the post office to withdraw the amount from the PPF account before maturity. Such withdrawals are allowed only once in a financial year.