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Public Provident Fund (PPF) – All You Need to Know

A Public Provident Fund (PPF) is a long-term investment scheme with considerable tax benefits. PPF was introduced by the Government of India and is available for all residents of the country. The scheme aims to encourage individuals to invest while ensuring a high ROI and safety for their contributions. The public provident fund is regulated by the Government of India and falls under the jurisdiction of the Ministry of Finance.

Features of Public Provident Fund

  • Entry Age: There is no specified age for Public Provident Account Opening.
  • Eligibility Criteria: You need to be a resident of India.
  • Interest Rate: The interest rate on PPF accounts is set by the government. It is subject to change every quarter based on prevailing market conditions. Historically, PPF has offered attractive interest rates compared to other small savings schemes.
  • Investments: The minimum amount is Rs 500 per annum while the maximum amount is Rs 1.5 lakh per annum. Investment in PPF can be made in installments or lump sum in multiples of Rs 50. Earlier, the limit on the number of installments used to be 12 while now there’s no limit in a financial year.
  • Tenure: The tenure for a Public Provident Fund is 15 years. On completion, your account can be extended with or without deposit in a block of five years indefinitely. However, if your PPF account is continued without deposits for more than a year after its maturity, you cannot make deposits in subsequent years.
  • Nomination: The faculty is available for the same.
  • Account-holding Categories: Both individuals and minors (through the guardian) can hold a Public Provident Fund account.

How to open a Public Provident Fund account?

There are many ways to open your PPF account. After choosing your preferred to open your PPF account, you will require the following documents –

  • An account opening form
  • Passport-size photos (2)
  • Your Aadhar card. In case you don’t have one, you need to provide a copy of the acknowledgment of your Aadhar card application.
  • Your address and Identity Proof such as – Aadhar Card, passport, PAN Card, driving license, ration card, or voter’s identity.
  • At the time of the account opening, you need to carry the original identity proof for verification.
  • You have to choose a nominee.

Where to open a Public Provident Fund account?

You can open a PPF account at various places such as –
  • Any general or a head post office
  • Branches of nationalized banks such as Banks of Maharashtra, State Bank of India, etc.
  • Private Sector Banks such as Axis Bank, ICICI Bank, etc.

How to link Aadhaar with PPF online?

  • Step 1: Log in to your Internet banking account.
  • Step 2: After logging in, click on the ‘Registration of Aadhaar Number in Internet Banking’ option.
  • Step 3: After that, you need to enter your 12-digit Aadhaar Number in the Internet Banking’ option.
  • Step 4: Then select the PPF account to link it to your Aadhar number and done.
  • Step 5: To check if your Aadhaar linking request is completed, click on the ‘Inquiry’ option.

How to withdraw funds from a PPF account before its maturity period?

Withdrawing funds from a PPF account before its maturity period is generally not allowed except under specific circumstances. PPF accounts have a lock-in period of 15 years, and premature withdrawals are not encouraged. However, there are certain provisions under which you can make partial withdrawals or close the account before its maturity. Here’s how it works:
  • Partial Withdrawal
  • Specific exceptions such as Medical Emergencies, Higher Education.
  • Account Closure or Death.
  • Account closure on specific conditions.

Things you must know about Public Provident Fund:

Tax benefits of the Public Provident Fund (PPF):
The maturity amount and interest in PPF are tax-free under section 80C of the Income Tax Act, of 1961.
Extension and maturity:
The Public Provident Fund (PPF) has a maturity period of 15 years. This means that the PPF account continues to earn interest for 15 years from the end of the financial year in which the account was opened. At the end of the 15 years, the account matures.
Maximum and minimum Public Provident Fund contribution:
The Public Provident Fund (PPF) has specific limits for the minimum and maximum contributions that can be made in a financial year. These limits may be subject to change based on updates in government regulations, so it’s essential to check the latest rules before making contributions.
  1. Maximum Public Provident Fund Contribution: The maximum contribution allowed in a PPF account for a financial year is INR 1.5 lakh. This means that you can deposit up to INR 1.5 lakh in your PPF account during a financial year. Contributions made beyond this limit won’t let you learn any interest and will not be eligible for tax benefits.
  2. Minimum Public Provident Fund Contribution: The minimum contribution required to keep a PPF account active is INR 500 per financial year. If the account holder fails to contribute at least INR 500 in any given financial year, the account will be considered inactive. To reactivate an inactive account, you need to pay a penalty of INR 50 for each inactive year, along with the minimum contribution for each year of inactivity.
Closure of the account:
You can fully withdraw your Public Provident Fund account balance only after your account completes 15 years of its tenure, as per the rules governing PPF accounts. You cannot withdraw the entire account balance anytime before completing the full tenure of your account, under any circumstances. However, if you’ve completed 7 years, premature withdrawal of up to 50% of the account balance is allowed. This is only permitted under special circumstances.
Following are the steps in case you want to close your PPF account –
  • Step 1: In form C, fill up all the required information and attach your PPF passbook.
  • Step 2: After that, you need to submit this to the relevant Post Office or bank branch where your account is held.
  • Step 3: You will receive the payment in your savings account linked to your PPF account after your application is processed.
Loan against PPF:
  1. Between your 3rd and 6th year, you can take a loan against your PPF account and the maximum tenure of the loan is three years. 36 months.
  2. Of the total available amount, the loan amount can be 25% maximum.
Risk Factor
Public Provident Fund offers risk-free and guaranteed returns as well as complete capital protection because it is backed by the Indian Government. Therefore, the risk factor involved in holding a PPF account is minimal.
PPF and its importance lie in the various benefits it offers to individuals, making it a preferred choice for those looking to save for their future financial needs. Here are some key reasons why PPF is considered important:
  • Safe and government-backed.
  • Tax benefits
  • Long term savings
  • Compound interest
  • Flexible Contribution
  • Loan and partial withdrawal flexibility.
  • Retirement Planning
  • No market fluctuations
  • Encouragement of Savings

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