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  • GURMEET SINGH

Public Provident Fund

Public Provident Fund or PPF is a saving-cum-tax-saving instrument introduced by the Ministry of Finance's National saving Institute. The instrument serves the purpose of mobilizing the saving by providing reasonable interest coupled with tax benefits. It allows an individual to build a retirement corpus while saving on taxes.

PPF account is a long term investment product with a minimum tenure of 15 years and an option to extend the account in a group of five years. An individual can invest a minimum amount of ₹ 500 and a maximum of ₹ 1,50,000 in a financial year. The attractive interest rate combined with safety and tax benefits.



Open a PPF account?

A PPF account can be opened with either a Post Office or with any nationalized and private bank. You need to submit the duly filled application form along with the required documents i.e. the KYC documents like identity proof, address proof, and signature proof. Post submitting these documents you can deposit a prescribed amount towards the opening of the account.


Interest rate on PPF?

The current interest rate is 7.1% p.a. (for the quarter 1 October 2020 to 31 December 2020, until 31st March 2020 it was 7.9% p.a.) that is compounded annually. The Finance Ministry set the interest rate every year, which is paid on 31st March.


Salient Features of the Scheme:


1) ELIGIBILTY : Individuals in their own name as well as on behalf of a minors can open the account at any designated Branch. As per extant rules, opening of PPF accounts in the name of NRIs & Hindu Undivided Family is not permitted.


2) TRANSFER OF ACCOUNT: The account can be transferred from other banks or Post Offices and vice versa upon request by the subscriber, free of charges.


3) SUBSCRIPTION LIMITS: Minimum of Rs.500/- and a maximum of Rs.1,50,000/- per financial year may be deposited. Any amount in excess of Rs.1,50,000/- in a financial year shall neither earn any interest nor will be eligible for rebate under the Income Tax Act. The amount can be deposited in lump sum or in a maximum of 12 instalments per year.


4) Maturity Period : 15 years. Extendable for 1 or more blocks of 5 years each after maturity.


5) RATE OF INTEREST: As declared by Government of India time to time.


6) TAX BENEFITS: Income Tax benefits are available under Sec 80C of the IT Act. Interest income is also totally exempt from Income Tax. Amount outstanding to the credit is fully exempt from Wealth Tax.


7) NOMINATION: Nomination facility is available in the name of one or more persons.


8) LOANS : A depositor can avail loan against balance in the PPF account in the third financial year. Rate of Interest for Loan will be 2% above the rate of interest on PPF.


9) Partial Withdrawal: Partial withdrawal is allowed once every year but after the expiry of 5 years from the end of financial year of the initial deposit in the PPF account.


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