What is a PPF Account? PPF Interest Rates and its Benefits.

PPF, or Public Provident Fund account, is a savings bank account managed by the government. It has a better interest rate than a normal fixed-deposit account.

Provident Fund accounts are popular among the common people, yet their income-earning potential is often neglected.

People are usually inclined toward its tax benefits rather than the capital appreciation this deposit scheme can generate.

Whether you have PPF in SBI or in any other bank or post office, the terms and conditions of the account remain the same as they are governed by the Ministry of Finance.

What is a PPF Account?

PPF is a government deposit scheme introduced in 1968 to promote savings habits among the common people and its tax benefits. 

It is a well-designed savings account that enables not only capital appreciation but also gives tax exemption on the entire amount of investment along with the interest earned.

You can open a PPF account at any bank or Post office. Most banks have the facility of online PF account opening too. 

Features of PPF Account at a Glance

• It is a flexible type of recurring deposit in which you can deposit a minimum subscription of ₹500/- and a maximum of ₹1.5 lacs per year. 
• You can make these deposits in a lump sum or in 12 installments per year. You can set up automatic monthly installments from your savings or current account.
• In a financial year (April- March) at least one deposit of any amount between ₹500 and ₹1.5 lacs has to be induced, otherwise, a penalty may be imposed on your account. 
• A discontinued PPF account can be renewed. You can revive it by paying a nominal charge of ₹50/- per year along with the arrears of subscription of ₹500/- per annum.
• The rate of interest is revised every quarter by the Government of India. Presently, it is 7.1 per annum.

PPF Account Interest Rates 2023

The interest rate on the PPF account keeps changing every now and then. It is reviewed every quarter by the government and released on their website.

The present rate is going at 7.1 percent per annum. This interest is credited to the account on March 31 of every Calendar year. That is on the bank’s closing day.

Below the chart is the interest rate history of the PPF account since January 2000.

Benefits of Public Provident Funds Account

You can get a number of benefits from having a PPF account.

Below are some of the major benefits you can get from the account.

Good returns

• A PPF account has a decent rate of interest. Back in the day, it was touching 11 percent. These days, it has come down to 7.1 percent, but still, it’s a decent rate compared to the fixed deposit rate, which is in the range of 5 to 7 percent. With a tax-exemption facility, PPF is a choice for everyone.

No risk is involved

• It is a 100 percent risk-free type of investment, as the Public Provident Fund is a government-backed scheme. Whatever you deposit in this account is totally safe and secure. A convenient product for long-term capital appreciation plans with the capacity to earn interest on interest.

Flexibility of deposits

• Deposit funds as you like. There will be 12 transactions allowed in the account. So either you can set a Standing Instruction to pay monthly or you may deposit a lump-sum amount on a specific day within the calendar year.

Extension available

• PPF extension is one of the best options you can get. It literally means you can keep investing money in a PPF account as long as you would like.

• Its maturity period is 15 years. When its tenure is over, you will have the opportunity to extend it every 5 years.

Tax benefits

• The deposit amount in the PPF account is eligible for exemption under Section 80CC of the Income Tax Act. The interest accrued and the principal amount invested are totally exempt from income tax.
• It is also exempted from the wealth tax.

Other benefits

• The amount lying in the PPF account is free from court attachment.

Who can open a PPF account?

• Any adult individual who is a citizen of India can open and maintain PPF accounts. 
• A minor may have a PPF account, but the guardian will be in charge of it.

Note that HUF (Hindu undivided family), PIO (Persons of Indian origin) and NRI (Non-resident individual) are not eligible to have PPF account

Where to open a PPF account?

PPF accounts can be opened at all the banks, including public sector undertakings such as the State Bank of India, Punjab and Sind Bank, and private sector banks such as HDFC and ICICI. The India Post Office is providing the service as well.

Also, read about Sukanya Samridhi Yojana account.

You can initiate the opening of a PPF account either online or by visiting the bank.

Either way, you have to visit the branch. So, it does not matter in which mode you open your account. 

Required documents to be submitted

KYC documents are required to be submitted.

The list of KYC documents that banks typically accept in accordance with RBI guidelines is below. You may refer to reserve bank KYC guidelines to avoid application rejection.

• Aadhaar card
• Voter ID card
• Passport
• Driving license
• NREGA job card
• Letter issued by national population registrar

You can submit any one of the above documents, along with your PAN card, to open a PPF account.

How to Apply for a Loan Against Your PPF Account!

You can get a loan of 25 percent of the PPF balance available in the first financial year. You will be eligible to avail of the facility from the 3rd financial year up to the 5th financial year. 

The rate of interest charged on a loan is 2% per year.

It is 6% per year if not fully repaid within 36 months.

So guys! Get the benefit of it. The interest rate is indeed very low, so try to repay within 36 months just to avoid a 6% rate of interest.

What is the tenure of a PPF account?

The tenure of the PPF account is 15 years, and the account can be continued for one or more blocks of 5 years.

You can continue this extension period, either by inducing a deposit into the account or without a deposit, but you will have to make a written request within 1 year from the date of maturity.

How To Withdraw Funds from PPF Account?

This is the part where people normally get confused. You are allowed to withdraw funds from your PPF account every year, starting at the end of the 5th year.

The withdrawable amount is 50% of the balance at credit at the end of the 4th year immediately preceding the year in which the amount is withdrawn or at the end of the preceding year, whichever is lower, less the amount of loan if any drawn by him that remains unpaid.

If the account is continued after maturity, a partial withdrawal of up to 60% of the balance at the commencement of the extended period is permitted.

You can also see the withdrawable amount yourself. This facility is available through Internet banking. 

When you make an account inquiry, you will see the eligible amount too. 

If you do not have net banking, then you have to inquire over the counter. 

Is the PPF Account Transferable?

Yes, you can transfer your PPF account anywhere within India. You can transfer from the permitted branches of nationalized banks, private sector banks, or the India Post Office.

You can even transfer the PPF account between banks. This means you can transfer your PPF account from HDFC to SBI or SBI to Post Offices. 

So, wherever you go, you can carry your PPF account with you.

If you have an SBI PPF account, there is a facility provided in YONO in which you can transfer this account to your desired branch.

YONO is an Internet banking platform of the State Bank of India. With this mobile app, one can do all sorts of financial and non-financial transactions.

How to Close PPF Account?

When your PPF account matures, you will have two options. Either to get an extension or to close it.

By then, it’s okay. If you want, it can be closed. But the real question is, Can you close the account when you are in need of funds?

Yes, you can! But under certain terms and conditions laid down by the government, the condition is as follows:

You can close your account after it attains five financial years, subject to 1% less interest as applicable from time to time from the date of opening your PPF account until the day your PPF account is closed prematurely.

This premature closure of the PPF account can be done only when

• You need the funds for the treatment of serious ailments or life-threatening diseases. It implies that the account holder, spouse, or dependent, such as your children and parents.
• You need the funds for higher education. Here, only the account operator can get the benefit. For example, you have a PPF account in your name, and you need funds for your son’s higher education. You cannot withdraw the funds. So, you have to plan accordingly. If you think you might need funds for your son’s education in the future, open a PPF account in his name only.

So, PPF is one of the best government-sponsored deposit schemes. This financial product is one of a kind. If you want to invest in zero-risk financial products with decent returns, this is the right choice. Besides, you get tax exemption on both the principal and interest portion. What else do you want more of?

Go ahead! And have one in your own name.