PPF

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.

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.

Also check, Best short-term investment plan with high returns in India.

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.

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, ICICI Bank, and  SBI PPF Account are designated to open the 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/-

Note: Also check EPF Loan is a premature withdrawal of funds in epf account.

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.

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.

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.

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.

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.

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.