Planning your financial future is crucial for a secure and comfortable life. One of the best ways to invest your money for the long term is through a PPF account. PPF, or Public Provident Fund, is a government-backed savings scheme that offers attractive interest rates and tax benefits. It is a popular investment option among individuals who want to build a retirement corpus, save for their children’s education, or accumulate wealth for other future goals. In this article, we will explore everything you need to know about a PPF account and how it can benefit you. So, let’s get started!
What is a PPF (Public Provident Fund)?
PPF (Public Provident Fund) is a government-backed savings scheme designed to help individuals build a retirement corpus. It offers attractive interest rates and tax benefits, making it a popular choice among investors. The scheme allows individuals to contribute a portion of their earnings each year, with the interest being compounded annually. Not only does PPF provide financial security for retirement, but it also offers tax-saving benefits, making it an ideal investment avenue. By understanding the features and benefits of a PPF account, individuals can make informed decisions about their financial future.
What Are the Features of PPF account
Interest rates
- The interest rate of the PPF account is regulated quarterly by the government of India
- The current interest rate offered by the PPF account is 7.1% compounded annually
- The interest rate is calculated every month on the lower PPF balance in the account after the 5th of every month to the last date of the month
- It is recommended that you contribute to your PPF account by the 5th of each month
Lock-in period
- The minimum lock-in period for a PPF is 15 years
- An individual can withdraw the full corpus amount at the end of 15 years
- Even if no additional contributions are made, an individual can keep the amount invested in the PPF account for a longer period of time
- There is no restriction to keep the amount invested in the fund after the lock-in period of 15 years
- Premature withdrawals are permitted, but only in cases of utmost urgency and emergency. In such cases, the necessary documents and details must be presented
Investments
- Individuals are required to invest a minimum of Rs. 500
- A maximum of Rs. 1.5 lakh can be deposited into the PPF account in a financial year
- Any contribution of more than 1.5 lakh rupees will be automatically rejected
- Deposits can be made in cash, cheque, demand draft or online
Nomination
- A PPF account holder may name more than one beneficiary
- When nominating a person or more than one person, the percentage of share for all nominees must be specified
- There isn’t a nomination facility in the case of PPF account for minors
- PPF account holders can nominate a person to receive the proceeds of the account in the event of their demise
Loans
- PPF account holders are eligible for a loan based on the balance in their PPF account
- The loan is available between the 3rd and 6th financial year of opening the account
- A interest of 2% per annum is applicable on the loan amount
- The principal amount must be repaid first, within 36 months, from the first day of the month following the month in which the loan was taken
- The principal amount can be paid in a lump sum or in two or more monthly installments
- Failure to repay the principal amount within 36 months will result in a 6% annual interest charge
- When acquiring a loan against a PPF account, an individual will not be paid any interest until the loan amount is paid off
- It is not possible to take out another loan until the first loan has been paid off
Taxation
- Contributions made to a PPF account are eligible for tax deductions under Section 80C of the Income Tax Act, up to a specified limi
Eligibility criteria to Open a PPF Account
For Indian citizens
The following people are eligible to open a PPF account:
- Indian Citizenship: Only Indian citizens are eligible to open a PPF account. Non-resident Indians (NRIs) are not eligible to open a new PPF account, but if they already have an account, they can continue to operate it until maturity.
- Minor Account: Parents or legal guardians can open a PPF account on behalf of a minor child. The account will be in the name of the child, with the parent or guardian acting as the operator of the account.
- Individual Account: PPF accounts are opened on an individual basis. Joint accounts or multiple accounts in the name of a single individual are not allowed.
*It should be noted that joint and multiple accounts are not allowed to be opened
For Minors
Minors can also open a PPF (Public Provident Fund) account under the following conditions:
- Guardian’s Role: Only one of the parents or legal guardians can open a PPF account on behalf of a minor. The guardian will be responsible for operating the account until the minor reaches the age of maturity.
- Contribution Limit: The total PPF investments in a minor’s account cannot exceed Rs. 1.5 lakhs in a particular financial year. The minimum contribution required for the account is Rs. 500.
- Grandparents’ Limitation: Grandparents are not permitted to open PPF accounts for their grandchildren. Only parents or legal guardians have the authority to open and operate the account.
- Parental Details and KYC: When opening a PPF account for a minor, the parents need to provide their details in the account opening form. Additionally, they must carry their KYC (Know Your Customer) documents along with a photograph for verification purposes.
It is important to note that as per the announcement made by the Indian Ministry of Finance in August 2018, non-resident Indians (NRIs) cannot open new PPF accounts. However, specific circumstances and considerations may apply. It is advisable to consult with authorized financial institutions or seek professional advice for detailed information on the eligibility criteria and regulations pertaining to PPF accounts for minors and NRIs.
For NRIs
NRIs (Non-Resident Indians) and Hindu Undivided Families (HUFs) are generally not permitted to open PPF (Public Provident Fund) accounts. However, there are certain exceptions to this rule:
- Existing Account Holders: Any resident Indian who becomes an NRI after opening a PPF account can continue operating the account until its maturity, which is typically 15 years.
- Maturity Period for NRIs: NRIs can retain their existing PPF accounts until the completion of the maturity period, which is 15 years. However, they cannot avail the option to extend the account for an additional 5 years, as Indian citizens can
It is important to note that NRIs and HUFs cannot open new PPF accounts. The exceptions mentioned above are applicable only to individuals who already hold PPF accounts before their NRI status.
How to Open a PPF Account Online?
- Log in to the net banking portal of your bank
- Look for the option to open a PPF account
- Choose between a self PPF account or a minor PPF account (if available)
- Provide the necessary information, such as bank account number and nominee details
- Enter the amount you want to deposit and choose the frequency of payment
- Verify your identity by entering the OTP sent to your registered mobile number
- Once the process is complete, your PPF account will be created, and you will receive the account number and other relevant details
- Some banks may require you to submit physical copies of supporting documents for KYC purposes.
How to Open a PPF Account Offline?
- Visit your nearest bank branch that offers PPF facility
- Approach the banking personnel and express your interest in opening a PPF account
- Fill out the PPF account opening form provided by the bank
- Submit all the necessary supporting documents along with the required PPF amount
- The bank will verify your documents and process your application
- Once the verification is complete, your PPF account will be successfully opened
It’s important to note that the specific requirements and procedures may vary slightly between different banks. Therefore, it is advisable to check with your bank for any additional documentation or steps that may be required to open a PPF account offline.
Documents Required to Open a PPF Account
The following documents are required to open a PPF account:
| Documents to Open PPF Account | Details |
|---|---|
| PPF Account Opening Form | Form A |
| KYC Documents | Aadhaar card, PAN card, Voter ID card, etc. |
| Proof of Address | Required |
| Passport Size Photograph | Required |
| Nomination Form | Form E |
| PAN Card | Required |
The following forms must be used when opening a PPF account or availing of its related services:
| Forms | Purpose |
|---|---|
| Form A | Facilitates the opening of a PPF account |
| Form B | Enables depositing funds into or repaying a PPF loan |
| Form C | Allows for partial withdrawal from the PPF account |
| Form D | Provides a means to apply for a loan against the PPF |
| Form E | Facilitates the appointment of a nominee for the account |
| Form F | Allows for making changes to the PPF account information |
| Form G | Facilitates claiming funds as a legal heir or nominee |
| Form H | Provides the option to extend the tenure of the PPF |
Note that these forms serve specific purposes within the PPF scheme, including account opening, deposits, withdrawals, loans, nominations, changes in account information, and extending the account’s tenure. It is essential to utilize the appropriate form for each specific transaction to ensure proper handling of PPF-related matters.
How to Check the PPF Balance Online?
Following are the steps to check PPF balance online-
- Link your existing bank account with your PPF account: Ensure that your bank account is linked to your PPF account. This allows for seamless transfer of funds and easy access to PPF-related services.Note
- The procedure to check PPF balance online may vary depending on the bank you are associated with..
- If your net banking facility is inactive, it is recommended to get it activated as soon as possible to enjoy the convenience of checking your PPF balance online.
- It is advisable to link your existing bank account to your PPF account to facilitate various banking transactions and streamline your PPF management.
- Enable net banking: Make sure that you have net banking facility enabled for your bank account. Contact your bank to activate net banking if it is not already activated.
- Access the bank’s internet banking portal: Visit the official website of your bank and log in to your internet banking account using your credentials.
- Locate the PPF balance check section: Once you are logged in, navigate through the internet banking portal to find the section dedicated to checking PPF balance and status.
How to Check PPF Balance Offline?
- Visit the bank branch where you opened your PPF account.
- Approach the banking staff and request them to update your PPF passbook.
- The PPF passbook contains all the necessary information, including transaction details and the current balance of your PPF account.
By updating your passbook, you can easily keep track of your PPF balance and monitor the transactions associated with your account.
How to Check PPF Balance Through the Post Office?
For individuals in remote and rural areas with limited access to banks, post offices serve as a reliable option to avail banking services, including the facility to open a PPF account. To check your PPF balance through the post office, follow these steps:
- Open a PPF account at the post office, where you will receive a passbook.
- Ensure that you regularly update your passbook by visiting the post office.
- The passbook serves as a record of your PPF account, containing essential details such as the PPF account number, transaction history, and total balance.
By keeping your passbook updated, you can easily monitor your PPF balance and stay informed about the various transactions associated with your account. Regular visits to the post office for passbook updates will provide you with an accurate and up-to-date view of your PPF account status.
What Are the Limitations of the PPF Account?
- Lock-in Period: PPF accounts have a lock-in period of 15 years, which means that the funds are not easily accessible in case of emergencies or immediate financial needs.
- Withdrawal Rules: There are specific rules and regulations governing the withdrawal of funds from a PPF account. Partial withdrawals are allowed only after completion of a certain number of years, and there are limits on the amount that can be withdrawn.
- Interest Rates: While PPF accounts offer decent returns, the interest rates are not as competitive as some other investment options available in the market.
- Individual Account: PPF accounts cannot be jointly held. Only individual accounts are permitted, limiting the options for shared investments or ownership.
- Contribution Limit: The maximum amount that can be contributed to a PPF account in a financial year is capped at Rs. 1.5 lakh. Any additional amount cannot be deposited into the account.
- Eligibility: Only Indian citizens are eligible to open a PPF account. Non-Resident Indians (NRIs) are not allowed to open or continue a PPF account.
- Closure Restrictions: A PPF account cannot be closed within 5 years of its creation, except in cases where the account holder or their spouse suffers from a life-threatening illness. Premature closure of the account is generally not permitted.
It’s important to consider these limitations while evaluating the suitability of a PPF account for your financial goals and requirements.
What Are PPF Withdrawal Limits?
- Completion of 6 Years: Premature withdrawal from a PPF account is allowed only after the completion of 6 years from the date of opening the account. Prior to this period, no withdrawals can be made except in exceptional cases like the death of the account holder.
- Withdrawal Amount Limit: The withdrawal amount is subject to certain limits.
- Loan Deduction: If a loan has been taken against the PPF account, the withdrawal amount will be reduced by the outstanding loan balance. The loan amount is deducted from the eligible withdrawal amount.
- One Withdrawal per Fiscal Year: Only one withdrawal is allowed per fiscal year. Multiple withdrawals within the same year are not permitted.
What Are PPF Withdrawal Rules on Extension?
When it comes to extending the tenure of a PPF (Public Provident Fund) account, there are specific rules to follow. Here are the details explained in subpoints:
- Withdrawal before Extension:
- If a PPF account holder wishes to extend the tenure of the account for another 5 years, they can choose to withdraw the funds before the extension period begins.
- Extension with Additional Contribution:
- PPF account holders have the option to extend the tenure of their PPF account by continuing to contribute to it.
- By extending the term, they will also earn interest on the additional contributions made during the extended period.
- Withdrawal after Extension with Contribution:
- After extending the PPF account with contributions, the account holder has the choice to withdraw 60% of the balance at the time of extension over the block of 5 years.
- It’s important to note that only one withdrawal per year is permitted during the extended period.
By understanding and following these withdrawal rules on extension, PPF account holders can effectively manage their accounts and make informed decisions regarding the withdrawal of funds.
How to Withdraw Money From a PPF Account?
- Fill out Form C with all the necessary information, including the PPF account number, withdrawal amount, and number of financial years completed.
- Send the completed Form C and the PPF passbook to the address listed on the form.
- The bank will verify the information on the form, as well as the account holder’s eligibility for the withdrawal amount.
- Once the bank completes the verification process, the withdrawn amount will be credited to the account holder’s savings account.
FAQs
Q: Is it necessary to withdraw the entire amount once the PPF account matures?
A: No, it is not mandatory to withdraw the entire amount from a matured PPF account. The account holder has the option to extend the tenure in blocks of 5 years.
Q: What is the minimum deposit amount for a PPF account?
A: The minimum value that can be deposited into a PPF account is Rs 500.
Q: Is it possible to open a PPF account online?
A: Yes, you can open a PPF account online through your bank’s net banking service.
Q: Can I extend the tenure of my PPF account by two years?
A: PPF account tenure can be extended in blocks of 5 years, so you can extend it accordingly.
Q: Do I have to provide nominee details when opening a PPF account?
A: No, it is not compulsory to add nominee details during the PPF account opening process.
Q: Is it wise to invest in a PPF account?
A: There are numerous reasons to invest in a PPF account, including the safety of funds, reasonable interest rates, and so on.
Q: What is the maximum time limit for operating a PPF account?
A: A PPF account has a lock period of 15 years, but it can still be operated after that time.
Q: Can I close my PPF account after 2 years?
A: No, the PPF account can only be closed after 5 years, and only under certain conditions.
Q: Can I open 2 PPF accounts?
A: Individuals are only permitted to open one PPF account.
Conclusion
PPF accounts are a good investment option because they allow an individual to build a bonus corpus. Before contributing to a PPF, it is best to learn everything there is to know about it, including its benefits, limitations, deposit amount, etc.
