Public Provident Fund -PPF

The Public Provident Fund (PPF) was designed to mobilize small savings and provide a return. This allows you to save on annual taxes and build a retirement fund. A PPF account is secure to invest in and save taxes while earning guaranteed returns.

Public Provident Fund (PPF), one of the most well-known savings schemes, is a risk-free investment option with limited risks.

The current interest rate for PPF is 7.10 %.

What is PPF Account?

The Government of India offers a retirement savings plan called Public Provident Fund (PPF). It is designed to offer a secure life after retirement. You can make as little as Rs. 500 per year and up to Rs.1.5 lakh in deposits.

Each year, the Finance Ministry sets the interest rate. It is paid on 31 March. The interest rate is calculated on balance remaining between the close of each month’s fifth and last days.

You can claim income tax benefits for the amount you invest in the account and retirement savings.

Features and Benefits of PPF Scheme | Features of a PPF account

You can expect risk-free returns because they are not affected by market volatility.
PPF is guaranteed, safe, and risk-free. It also offers capital protection. There is minimal risk in having a PPF account.
An account can be opened for as low as Rs 500. Annual investments exceeding Rs 1.5 lakh won’t earn interest and are not eligible for tax savings.
The account holder of a PPF account can nominate a nominee, either during or after opening it.
Compounded interest rate
Income tax deduction under the Income Tax Act 1961, 80C.
Investments for long-term success over 15 years
Advances and loans against PPF balance
Unlimited extension of PPF account after maturity in blocks of five years
Partially withdrawn facility available from the seventh financial year onwards.
You can deposit money into a PPF account by cash, cheque, demand draft (DD), or online.
Only one person can have a PPF account. It is forbidden to open an account under joint names.
A PPF account must be deposited at least once per year for 15 years.
The minimum tenure for the PPF is 15 years. However, you can extend your tenure in blocks of 5 years per your wishes.

Remember that a PPF account can’t be closed before it reaches maturity. However, a PPF account can be transferred from one point to another. The nominee can only request the closing of an account in the event of the account holder’s death.

Eligibility to open a PPF account

A PPF account can be opened by any Indian adult who is a resident. A legal guardian may open the account for a minor or someone with a mentally impaired person.

PPF is open to Indian citizens. A citizen may only have one PPF account unless a minor owns it.

HUFs and NRIs are not eligible for a PPF account. If they already have a PPF account, it will remain active until its expiration date.

How to Apply For PPF Account| How to open a PPF Account?

A PPF account can be opened at either the nearest Post Office branch or any participating bank branch. It is possible to open one at your convenience.

Below are the participating banks that offer PPF accounts.

List of Bank Provide PPF Account:

Axis Bank
HDFC Bank
IDBI Bank
Indian Overseas Bank
ICICI Bank
Indian Overseas Bank
Kotak Mahindra Bank

Allahabad Bank
Bank of India
Bank of Maharashtra
Bank of Baroda
Central Bank of India
Canara Bank
Dena Bank
Indian Bank
Punjab National Bank
State Bank of India
Union Bank of India
United Bank of India

Below are the documents you will need:

Completed application for account opening
KYC documents – Aadhaar and Voters ID, Driving license, Passport etc.
Passport size Photograph
Nominee declaration form

In case of Minor

Date of Birth Certificate
Details of Guardians (Natural/Legal) with KYC Document

After submitting the required documents, you can deposit a predetermined amount towards opening an account.

Which bank is best for a PPF Account?

The Government of India provides PPF accounts and not by any bank. When you open a PPF bank account, all banks offer the same benefits and features.

The government sets the interest rate, and it is the same regardless of where the PPF account is located. There is not the best bank that offers PPF accounts.

Which bank is best for a PPF Account?

The Government of India provides PPF accounts and not by any bank. When you open a PPF bank account, all banks offer the same benefits and features.

The government sets the interest rate, and it is the same regardless of where the PPF account is located. There is not the best bank that offers PPF accounts.

How to open a PPF account online?

Every bank has a different procedure for opening a PPF account. However, the general steps must be followed.

These are the steps to follow to open an online PPF account.

A PPF account must be opened by an investor who has an account at the bank.
Login to the relevant net banking portal
Customer shall be required fill in the specified form as made available to the Customer through the logged in section of the Website.
Select the option to “Open a PPF Account.”
Select the appropriate option from a Self-Account or a minor account.
Please enter the necessary information, such as bank details and nominee details.
Verify details like Permanent Account Number (PAN), etc. This information is displayed on the screen.
After verifying your details, enter the amount you want to deposit into the PPF account.
Standing instructions will be required to allow the bank to take the amount either at regular intervals or as a lump sum.
Once you have selected, an OTP will be sent to your registered mobile number.
After this verification, your PPF account is opened.

Some banks might ask you to send a hard copy and the reference number to the bank.

Taxation

The interest earned and the accrued amount are exempt from taxes at withdrawal.

All deposits in the PPF account can be deducted under Section 80C (the Income Tax Act).

Procedure for withdrawal from PPF

The maturity date, which is usually 15 years after the account balance was paid out, is when one can withdraw all PPF funds. After 15 years, all funds remaining in an account holder’s PPF account and accrued interest may be withdrawn. The account can then be closed.

PPF accounts mature after 15 years, starting from when the account was opened. The account holder can choose from three options at maturity:

Account Close & withdrawal money

Account holders can withdraw the PPF amount and accrued interest. All maturity proceeds are exempted from tax.

The maturity value of your money is exempted from tax if you withdraw it.

Extension – by adding 5 more years of contributions

Account Holder can extend the PPF account’s life indefinitely by five years.

You can choose to extend your account or continue making new contributions. This is possible for up to 5 years.

Account Holder must submit Form H to request an extension of the account. This form requires that additional contributions be submitted.

Otherwise, the default option of Extension without any further contribution will apply.

The maximum 60% of the balance at the Extension date can be withdrawn once the account has been extended with contributions. You can withdraw this amount in one lump sum or spread it over several years. One withdrawal per year is allowed.

Extension Without further contribution:

Extension without additional contribution, is available. This option is available without completing any forms. You can withdraw up to the entire account balance, but only one withdrawal per year.

Part / Full withdrawal Process

If you want to withdraw your PPF balance in part or full.

Step 1: Fill out Form C with the relevant information. This form can be downloaded from the bank website, at the Post Office website, or in your branch.
Step 2: Submit form to the branch of the Post Office or bank where your PPF account is located.

Nomination for the PPF

One or more people can be nominated. If more than one person is nominated, the percentage share must be stated.

For the PPF account of a minor, nominations cannot be made. Parent, spouse, relatives, children, friends, etc. Nominations can be made for the account holder.

The account holder must complete Form E to add a nominee to the PPF account.

You can nominate anyone at any point during the term of the account. You can modify, cancel, or change your nomination through Form F.

The account holder must sign the nomination forms along with two witnesses. The nominees don’t need to sign the nomination forms.

Once the form has been completed, it must be returned to the bank/post office branch.

Premature closure of PPF account

PPF accounts cannot be closed before 5 years have passed since opening. It can be closed only if the account is in serious condition. To support a claim on these grounds, supporting medical documents must be provided.

After five financial years, the PPF account may be closed early.

The following reasons apply:

The account holder, spouse, or dependent children are treated for serious illnesses or life-threatening conditions.
Higher education for the account holder and minor account holders

On the premature closing of the PPF account, 1% interest will automatically be deducted from applicable interest rates.

Closer before maturity process

Step 1: Determine if you are eligible to withdraw prematurely.
Step 2: Fill out Form C if you are eligible and return it to the bank/post office with all relevant information.
Step 3: If your account is in the name of a minor, you’ll need to make an additional declaration that the money you withdraw is for the benefit of the minor and the minor is still alive.
Step 4: Submit the completed form and any supporting documents to your bank branch or Post Office.
Step 5: If all information and documents are satisfactory, the bank/PO will process the payment and release it

In the event of death:

The legal heirs/ nominees can claim the proceeds of the PPF account in the case of a deceased account holder. You must submit Form G along with the claimant. This form contains information about your claims, including account number and nominee details.

To claim the PPF account proceeds, you will need to submit the following documents:

If the account holder made the nomination
All nominees must complete Form G
Death Certificate
Passbook for the subscriber
If an account holder does not make the nominee, legal documentation must support the claim.
Legal heirs fill in Form G
Succession Certificate, Letter to Administration, or attested copy
Passbook for the subscriber

If an account holder does not make the nominee, the claim amount falls below Rs. 1 Lakh.

Legal heirs fill in Form G
Death Certificate
Annexure I to Form A (Letter of Indemnity), on stamped paper
Annexure-II of Form G (Affidavit), on stamped paper

Annexure III of Form G (Letter to Disclaimer on Affidavit on Stamped Paper)

Bottom Line

The PPF account can be a great retirement option for individuals who don’t work in the corporate sector. The income tax does not apply to the interest earned or the returns. You can keep this money – the court cannot attach it to any debts or liabilities you might have.

It is important to remember that your funds are locked for 15 years, and you can only withdraw a limited amount of them.

FAQs

Yes, an account can be opened in the name and custody of minor children. Please remember that this account will be for the child, and you will only be the guardian.

If the minimum annual contribution of Rs 500 is not made, the PPF Account will become inactive.

You can request to activate the account by writing at the bank branch or post office where it is located.

Your account has been deactivated. You will need to pay Rs 50 per year for not making a subscription and Rs 500 minimum subscription for each missed year. Your account will then be activated, and you can start earning interest again.

Yes, you can get a second loan against the PPF account, second loan cannot be taken until you have fully settled the first loan.

To change the account’s status from minor to major, a minor PPF account holder can submit a revised form and any necessary documents. As an attestation, the guardian may apply with the account holder’s signature.

The maximum number of times that you can extend the tenure for an account is unlimited, provided you do so in blocks of five years.

According to the rule, non-resident Indians cannot open accounts under the PPF Scheme. It was enacted on July 25, 2003.

NRIs may find a silver lining. If you had a PPF account and were a resident of India during the 15-year tenure, you can continue to invest in the account until it matures.

Only One. at any time in your life, you can only have one PPF account. If you are found to have more than one account, your principal will be returned, and the account you were deactivated will be closed.

PPF accounts have a 15-year lock-in period for investments.

An amount above Rs 150,000 won’t earn interest and will not be eligible to claim deductions u/s 80C of the Income Tax Act 1961.

You can put more than Rs.1,50,000 into the PPF account for a given year, but there will be no interest or tax benefits. Section 80 C states that the maximum tax deduction per financial period is Rs.1,50,000.

The maximum investment amount is Rs. 1,50,000 annually.

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