PPF Or Public Provident Fund account is a saving bank account managed by the government. It gives better interest rate than the normal fixed deposit account.
Provident Fund account is popular among the common people yet its income earning potential is often neglected.
People usually inclined toward its tax benefits rather than the capital appreciation this deposit scheme can generate.
Either you have PPF in SBI or in any other bank and post offices, the terms and conditions of the account remain the same as it is governed by the ministry of finance.
What is a PPF Account?
PPF is a government deposit scheme, introduced in the year 1968 to promote savings habit among the common people and its tax benefits.
It is a well devised savings account that enables not only capital appreciation but also gives tax exemption on the entire amount of investment along with the interest earn.
You can open PF account in any bank and Post offices. Most of the bank has the facility of online PF account opening too.
Product features at glance
- It is a flexible type of recurring deposit in which you can deposit a minimum subscription of ₹500/- and maximum of ₹1.5 lacs per year.
- You can make this deposits in lump sum or in 12 installments per year. You can set automatic monthly installment from your savings Bank or current account.
- In a financial year (April- March) at least one deposit of any amount between ₹500 to ₹1.5 lacs has to induce, otherwise penalty may impose on your account.
- 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 decide by the Government of India. Presently it is 7.1 per annum.
PPF rate of interest
Interest rate of PPF account keeps on changing every now and then. It is reviewed every quarter by the government and release on their website.
Present rate is going at 7.1 percent per annum. This interest earn is credited to the account on 31st March of every Calendar year. That is on the bank’s closing day.
Below given chart is the interest rate history of PPF account since January 2000.
| For the Period | Interest rate of PPF in % |
|---|---|
| 15.01.2000 to 28.02.2001 | 11% |
| 01.03.2001 to 28.02.2002 | 9.5% |
| 01.03.2002 to 28.02.2003 | 9% |
| 01.03.2003 to 30.11.2011 | 8% |
| 01.12.2011 to 31.03.2012 | 8.6% |
| 01.04.2012 to 31.03.2013 | 8.8% |
| 01.04.2013 to 31.03.2016 | 8.7% |
| 01.04.2016 to 30.09.2016 | 8.1% |
| 01.10.2016 to 30.03.2017 | 8% |
| 01.04.2017 to 30.06.2017 | 7.9% |
| 01.07.2017 to 31.12.2017 | 7.8% |
| 01.01.2018 to 30.09.2018 | 7.6% |
| 01.10.2018 to 31.06.2019 | 8% |
| 01.07.2019 to 31.03.2020 | 7.9% |
| 01.04.2020 to 31.03.2022 | 7.1% |
Benefits of Provident Funds
You can get a number of benefits by having a PPF account. Below are some of the major benefits you can get from the account.
Good returns
- PF account has a descent rate of interest. Earlier it was touching even 11 percent. These days it has slightly come down to 7.1 percent but still it’s a very descent comparing to the fixed deposit rate which is in the range of 5 to 7 percent. With tax exemption facility, PPF is a choice for everyone.
No risk involve
- It is 100 percent risk free type of investment as Public Provident Fund is a government backed scheme. Whatever you deposit money in this account, it is totally safe and secure. A convenient product for long term capital appreciation plan with the capacity to earn interest on interest.
Flexibility of deposits
- Deposit funds as you please. There will be 12 numbers of transactions allowed in the account. So either you can set a Standing Instruction to pay monthly or you may deposit lump-sum amount on a specific day within the calendar year.
Extension available
- PPF extension is one of the best option you can get. It literally means you can keep on investing money in PPF account as long as you would like.
- Its maturity period is 15 years. When it’s tenor is over, you will get the opportunity to extend it every 5 years.
Tax benefits
- 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 exempted from Income Tax.
- It is also exempted from wealth tax.
Other benefits
- Amount lying in PPF account is free from court attachment.
Who can open PPF account?
- Any adult individual who is a citizen of India can open and maintain PPF accounts.
- A minor can have a PPF account but it will be operated by the guardian.
Note that, HUF (Hindu undivided family),PIO (Persons of Indian origin) and NRI (Non resident individual) are not eligible to have PPF account
Where can you open PPF account?
PPF account can be opened in all the banks, public sector undertaking such as State Bank of India, Punjab and Sind Bank and private sector bank such as HDFC, ICICI. India Post office, is providing the service as well.
Also read about Sukanya Samridhi Yojana account.
You can initiate for opening of PPF account either through online mode 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. Below is the list of KYC documents which usually accepted by the bank as per RBI directives.
- 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 accounts.
You can take loan against PPF account !
You will get loan of 25 percent of the PPF balance available at the first financial year. You will be eligible to avail the facility from 3rd financial year up to 5th financial year.
The rate of interest charged on loan is 2% per annum.
It is 6 % per annum if not fully repaid within 36 months.
So guys! Get the benefit of it. Interest rate is very low indeed and try to repay within 36 months just to avoid 6% rate of interest.
Duration of account
The tenor of 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 deposit into account or without deposit, but you will have to make a written request within 1 year from the date of maturity.
PPF withdrawal rules
This is the part where normally people get confused. You are allowed to withdraw fund from your PPF account every year from the end of the 5th year.
Withdrawable amount is 50% of the balance at credit, at the end of 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 which remains unpaid.
If the account is continued after maturity, a partial withdrawal up to 60% of the balance at the commencement of the extended period is permitted.
You can also see the withdrawable amount by yourself. This facility is available under internet banking.
When you make an account enquiry, you will see the eligible amount too.
If you are not having net banking, then you have to request the bank to know the same.
Is PPF account transferable?
Yes, you can transfer your PPF account anywhere within India. You can transfer from the permitted branches of Nationalized banks or Private sector banks or India Post Office.
You can even transfer PPF account interbank. Means you can transfer your PPF account from HDFC to SBI or SBI to Post Offices.
So, wherever you go, you can carry along your PPF account with you.
If you have SBI PPF account, there is a facility provided in YONO in which you can transfer this account at your desired branch.
YONO is an internet banking platform of State Bank of India. With this mobile app one can do all sorts of financial and non financial transactions.
Closure of PPF account
When your PPF account is matured, you will have 2 options. Either to get 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 fund?
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 subjected to 1 % less interest as applicable from time to time from the date of opening your PPF account till the day your PPF account closed prematurely.
This premature closure of PPF account can be done only when
- You need the fund for treatment of serious ailments of life threatening diseases. It implies to account holder, spouse or dependent such as your children and parents.
- You need the fund for higher education. Here, only account operator can have the benefit. For example, you have PPF account in your name, and you need fund for your son’s higher education. You cannot withdraw the fund. So, you have to plan accordingly, if you think you might need fund for your son’s education in the future, open PPF account in his name only.
So guys, PPF is one of the best government sponsored deposit scheme. This financial product is one of a kind. If you want to invest in zero risk financial product, with descent return this is the right choice. Besides, you get tax exemption on both principal and interest portion. What else do you want more?
Go ahead! And have one in your own name.
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