Public Provident Fund (PPF) at a Glance

The Public Provident Fund, or PPF, was put in place in India in 1968 with the aim of mobilising small-scale savings in the form of investment, integrated with returns. It is also known as a savings-cum-tax savings investment vehicle that enables one to set up a retirement corpus whilst saving on annual taxes. If anyone is looking for a secure investment option to save their taxes and earn assured returns, they should definitely open a PPF account. 

The Public Provident Fund (PPF) account is one of the most sought-after long-term investment options for people with an appetite for low-risk, as both the money in the PPF account and the returns it brings about are guaranteed. Your PPF account can be opened with a minimum investment of Rs. 500 only, and the PPF interest rate for Q1 FY 2022–23 is 7.1%.

What is a PPF Account?

The Public Provident Fund or PPF, is a long-term investment option that offers an alluring rate of interest and returns on the amount you invest. The interest you earn and the returns you receive are not, in any shape or form, taxable under the Income Tax. Open a PPF account and under the scheme, the amount deposited during the year will get claimed under section 80C deductions. 

PPF Account Details

The PPF Account Details are mentioned below for your convenience. 

PPF Account Forms

In order to avail of all these benefits, investors must fill out a few forms and submit them on the online portal. Listed below is a table of documents and the purpose they serve.

Please note that a few of these forms are only available on the online portal as a few specific banks have moved some of their PPF procedures, like account opening or contribution to the PPF account, online only.

PPF Account Opening Form

People who want to open a PPF account should fill out PPF Form A. The form will ask for the following details: 

• Name of the account holder.
• Address of the account holder.
• To pay for your first deposit, send a cheque from your bank account.

PPF Contribution Form

The investor must enter the required data and submit the PPF Form B to make any contributions to their PPF account. The PPF Form B is also called the PPF Contribution Form or PPF Deposit Form. The form asks for the following details:

• Subscriber’s name.
• PPF account number.
• Amount to be credited.

PPF Partial Withdrawal Form

The Public Provident Fund enables its investors to make partial withdrawals from their accumulated savings under some conditions, such as a child’s education, a child’s wedding, medical emergencies, etc. The form asks for the following details:

• PPF account number.
• The amount of money to be withdrawn.
• Number of years passed since the expiry of your PPF account.
• The mode of amount transfer (Demand Draft or Registered Savings Account)
• Affix a revenue stamp to the form.

PPF Loan Form

To borrow a sum against the balance gathered in your PPF account, you have to submit PPF Form D along with the below-mentioned details. 

• PPF account number.
• Amount of loan needed.
• Undertaking stating that the amount will be repaid with interest within 3 years.
• A copy of the PPF passbook.

PPF Nomination Form

The investors have the option of adding a nominee to their PPF account, and this nominee, in the event of the unforeseen death of the investor, is liable to get the benefits of the PPF account. The details mentioned below will be asked for the same. 

• The name of the account holder.
• Nominee’s name.
• PPF account number.
• Nominee’s address
• DOB, if there is a minor nominee.

Public Provident Fund Account Benefits

A few PPF Account Benefits that you must know about-

Risk-free, Guaranteed Returns

Backed by the Indian Government, the Public Provident Fund is one of the most significant PPF account benefits. Your PPF savings are entirely risk-free. The returns are guaranteed by the government as well. The funds in your PPF Account will not be attached by a court order to pay off your debtors if you have any.

Multiple PPF Tax Benefits

PPF has the tax status of exempt-exempt-exempt (EEE), which is one of the only investments in the country to enjoy such a massive advantage. Up to Rs 1,50,000, the amount you invest can be deducted from your taxable income, the interest you earn on your balance is non-taxable and the maturity amount you get after 15 years is also tax-exempted. This makes a PPF Account one of the most tax-efficient investments.

Small Savings, Good Returns 

The Public Provident Fund grants you a lot of flexibility in the amount you invest. You can start your PPF account with an amount as small as Rs. 100. Every year, you have the liberty to invest a minimum sum of Rs. 500 and a maximum sum of Rs. 1,50,000. You can make these investments in 12 installments or deposit a lump sum. Currently (as of June 07, 2022), the PPF offers an interest rate of 7.1%, compounded annually.

Liquidity with Partial Withdrawal & Loan Facilities

Even though the PPF has a vast 15-year lock-in period, you have numerous options to make use of the funds in your PPF account. You may take a loan (up to 25% of the balance accessible at the end of 2 years preceding the year in which you applied for the loan) in between the 3rd year and the 6th year. You have to repay the loan in 36 months at a rate of interest that is 2% more than the interest you earn.

The Flexibility of Tenure

Once your PPF account matures after 15 years, you have two options – either withdraw the entire PPF fund or extend the tenure of your account in blocks of five years.

Eligibility Requirements for Opening a PPF Account

• Residents of India, over the age of 18, can open a PPF account, for either themselves or for anyone in their family or on behalf of a minor.
  
• Individuals can not open a joint or a Hindu Undivided Family (HUF) account.
  
• A PPF account, online or offline, can be opened for a minor below 18 years of age. In this specific case, the total investments in the PPF account of the minor and guardian/minor can not exceed Rs. 1.5 lakhs for a given financial year. 

Grandparents are not eligible to open a PPF account, online or offline, for their grandchildren.

Few Key Features of PPF– 

• Tenure: Public Provident Funds have a minimum tenure of 15 years, and you can extend it in five-year blocks according to your convenience.
• Investment Limits: PPF allows investors to invest at least Rs 500 and as much as Rs 1.5 lakh in a financial year. You can make the investment in a lump sum or in 12 installments at most.
• Opening Balance: You can open your account with just Rs. 100. If you have annual investments of over Rs 1.5 lakh, they will not earn you any interest and your PPF Account will not be eligible for any tax savings.
• Deposit Frequency: Deposits in the PPF account need to be made a minimum of once per year for 15 years.
• Mode of deposit: The deposits you make into your PPF account can be made either by cash, Demand Draft (DD), cheque, or online transfer of funds.
• Nomination: A PPF account holder can consider and designate a nominee for the account he or she holds, either at the time of opening the PPF account or subsequently.
• Joint accounts: You cannot open a PPF account in joint names. A PPF account can only be held in the name of one individual.
• Risk factor: Since the PPF is backed by the Indian Government, it offers 100% guaranteed, risk-free returns as well as complete protection for your capital. The factor of risk involved in holding a PPF account is at its lowest.

How to Open Your PPF Account

One can open a PPF account in two ways, either online or offline. Although the process differs from bank to bank, the essence of it usually remains the same.

Online-

To open a PPF account online in a particular bank, an investor must hold a savings account with the participating bank. Moreover, it is essential for the said bank to have mobile banking or internet banking services for the same.

The investor can follow the below-mentioned steps to open a PPF account online:

Step 1: Open your bank’s app or visit their website online and log in to your online account.
Step 2: Click on the “Open a PPF Account” option.
Step 3: Look for and click on the “Self Account” option.
Step 4: Fill out the application form that appears on the screen by entering the details asked by the portal. Make certain that you verify and fill out the accurate details before submission.
Step 5: Specify the amount that you wish to deposit in your PPF account per year.
Step 6: At this point, you can also set standing instructions to transfer the specific amount you have decided on, which will get deducted automatically from your savings account and transferred into your PPF account.
Step 7: Review the application thoroughly before submitting it. On submission, you will receive an OTP on your registered mobile number. Feed-in your OTP to confirm your identity and authorise the transaction you’ve made.
Step 8: On confirmation, you will receive a message and an email indicating that you have successfully created your PPF account.

Congratulations! You have successfully created your PPF account. 

Offline-

If you, however, do not wish to open a PPF account online, you may easily take the offline route. 

For that, follow the below-mentioned steps:

Step 1: First and foremost, make sure that you have all the relevant documents compiled before you open your PPF account. Moreover, it is best if you already have a savings account with the said bank to open your PPF account more conveniently.
Step 2: Visit the branch of your bank that is nearest to you.
Step 3: The bank executive will guide you in filling out the application form.
Step 4: Duly fill out the application form and submit it along with the relevant documents you’ve brought for the PPF account.

Congratulations! You have successfully created your PPF account. 

How to Close Your PPF Account

It is to be noted that your PPF account can not be closed before it matures unless in the case of a few specified circumstances. If you still wish to close the account, please visit the bank branch where your PPF account is held. A written application stating the reason for the withdrawal, the proceeds, and the closing of the account needs to be provided with the original passbook. You have to mention your bank details for maturity proceeds to be transferred as well. You must attach your address and identity proof with a canceled cheque. The bank will then check if the account is done with its lock-in. If yes, then your account will be closed and maturity proceeds will be credited to your bank account.

PPF Account Rules

Before opening up a PPF account, one must know a few rules that they must abide by to reap the benefits of PPF. They have been mentioned below for your convenience. 

Eligibility 

• All residents of India can open a PPF account.
• An investor is allowed to hold only one account in their name, to open a second account it must be on the behalf of a minor where the minor gets hold of the account whence they come of age.
• Investors cannot open a joint PPF account. PPF Accounts can only be held under the name of one person.
  Non-Resident Indians (NRIs) or Hindu Undivided Families (HUFs) are not eligible to open a PPF account.
• However, for NRIs who’d opened their PPF accounts while they were residents of Indians can continue to maintain the account until maturity. But, they won’t be allowed to seek any extensions.
• If an investor opens a PPF account for their minor child, the total amount that they are allowed to invest is Rs. 1.5 lakh in a financial year.

Maturity

The period of lock-in for a PPF account is 15 years and the years may be extended if you wish to. However, if there is no requirement for funds, it is generally advised to extend the PPF account beyond 15 years. The holder of the account may extend the duration of the PPF account by a block of 5 years. Additionally, there is no fixed limit on the number of times that a PPF investor can extend their account. 

However, an investor could always retain their account once it matures without making any further deposits for any period. They will continue to keep earning interest on the balance of their PPF Account until they close their account.

Nomination

The account holder has the liberty to nominate more than one person for their PPF account. If they choose more than one person to nominate for their account, it is mandatory for them to mention the percentage of shares. Moreover, all the shares of all nominees should add up to 100 percent.

Where to open

An interested PPF account holder can open a PPF either at the post office or at a partnered bank by submitting all the required documents.

Account Transfer

Account holders have the liberty to transfer their PPF account from a bank to a post office and vice versa. Moreover, the PPF account can be transferred between different branches but of the same post office/bank.

One must submit a transfer request at the home branch for the same. The new branch then notifies and verifies the receipt of the form. Along with the transfer request, account holders must submit the following documents as well – 

• Nomination form
• PPF passbook
• Certified copy of the account
• Opening application form of the original account.
• A cheque or demand draft for the outstanding balance

Public Provident Fund Scheme

The Public Provident Fund Scheme or PPF is a Central Government Scheme, which has been framed under the PPF Act of 1968. Thus, it is safe is say that PPF is a government-backed, long-term Savings Scheme. The PPF scheme offers an investment avenue with good returns coupled with income great tax benefits.

About PPF Pension Scheme

It is to be noted that the PPF Scheme is not a pension or retirement-specific vehicle, it may be used as a pension or retirement scheme but it may also be used for other purposes. 

Ways to Check PPF Balance

To check your PPF account balance, you can take your pick from two possible ways, which are:

Offline method: Visit the bank branch at which you’ve opened your PPF account.

Online method: Log in to your bank account and access all your details. You can check your present balance, the interest that your balance has earned, and the deposits that you have made by using net banking. 

Loan Against PPF Account

PPF accounts allows investors to take personal loans against the available balance in their PPF account at a competitive interest rate. This is beneficial for people who wish to apply for short-term loans but without pledging any of their assets as collateral.

This is a huge benefit for the investors, and this feature can prove to be very handy, especially when the loan is availed for a shorter duration. The rate of interest offered on the loan is also incredibly competitive.

Banks That Offer You the Facility of Opening PPF Bank Accounts

A number of banks in the country offer the facility of opening PPF accounts. The State Bank of India and its state branches, HDFC, ICICI Bank, Bank of Baroda, IDBI Bank, UBI, Union Bank of India, and Axis Bank, are a few to name. You can also open a PPF account at the post office. 

You can visit these banks, evaluate their features and the benefits they provide in terms of opening a PPF account and make a decision that is a good fit for you. 

Tax on PPF Interest

In accordance with provisions of section 10(11) of the IT Act, the interest accrued in the PPF account where the annual contribution doesn’t exceed ₹5 lakh will not be taxable. Appropriately, interest accrued on account for the annual contributions shall be exempt in your hands (up to ₹1.50 lakh).

PPF Account for Minor

In the event of PPF accounts being made for children under the age of 18, the account shall be maintained on his or her behalf by a guardian up until the minor comes of age. There is no minimum or maximum age restrictions set for opening a PPF account.

PPF Account for NRIs

It is not permitted for non-resident Indians to open or operate a PPF account in the country. It is, however, possible that if a person opened a PPF account as an Indian citizen but later became an NRI, then the account remains active.

PPF Account for Senior Citizens

There is no set upper age limit for opening a PPF account, so it is very possible for senior citizens to open a PPF account for themselves.

Frequently Asked Questions (FAQs)