The Public Provident Fund (PPF) Scheme was started in 1968 and is a popular long-term investment option that offers a relatively high rate of interest which is tax free.
What are the benefits of the Public Provident Fund (PPF) Scheme?
Safe: It is backed by the Government of India
Attractive rate of interest: It offers a rate of 8.1 % per annum which is higher than many fixed deposit offerings.
Tax free – Both the principal deposited and the interest earned are completely tax exempt under Section 80C.
How do I open a Public Provident Fund account and who is eligible?
Any resident of India can open a PPF account at the Post Office or with an authorised bank branch. Some people prefer opening a PPF account with a bank since they can view their balance and statement online through Net Banking.
You will need to submit some documentation at the time of opening your account with a bank including Form A, KYC documents, and opening a savings account with the bank ( if not already a customer). You might also require to furnish residence proof in some cases (like a recent phone or electricity bill).
There is no provision for a joint account but you can appoint a nominee on your account. The nominee will be paid in case of death of the account holder. However, the nominee cannot continue to make contributions to the account.
You can also transfer your PPF account and it will be maintained as a continuing account. There is a separate form to be filled for transferring your account.
Only one PPF account per person is allowed, except if a parent opens an account in the name of a minor child. Grandparents cannot open a PPF account in their grandchild’s name, unless both parents of the child are deceased.
Features of a Public Provident Fund account
The minimum amount to be deposited is Rs. 500 a year, and the maximum is Rs. 1, 50, 000 a year. Failure to deposit the minimum annual amount results in a penalty of Rs. 50.
The account has a lock-in period of 15 years since it is a long-term investment option. There is no provision for premature closure of the account. However you can make a premature withdrawal from your account from the 7th year onwards.
You can avail of a loan facility against your PPF account between the 3rd and 6th financial year.
You can close your account after maturity and withdraw the complete amount. You can also extend your PPF account for a block of 5 years on maturity.
How to check your PPF account
When you open a PPF account, you will be issued a passbook where you can look up all the details of your balance and withdrawals. Some banks may offer net banking in lieu of a passbook at the discretion of the customer.
Your ability to look up your balance online is dependent on your bank or Post Office facility.
If you have a PPF account with a bank that has net banking facilities, then you can view your account balance online. You can also view a detailed statement on deposits and withdrawals and any loan transactions online.
You can also make online transfers to your PPF account from your savings account in the bank or in some cases, give standing instructions to your bank to ensure regular transfers to your PPF account.