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PPF Account is a long-term saving scheme which gives all-round tax benefit. It was introduced in India in 1968 to mobilize small saving in the form of an investment, coupled with a return on it. It can also be called a savings-cum-tax savings investment vehicle that enables one to build a retirement corpus while saving on annual taxes.
Today, it is a preferred investment option since it is backed by the Government of India and comes with an attractive interest rate and guaranteed returns. These returns are entirely exempt from tax under Section 80C of the Income Tax Act. Investors can save tax ranging from Rs. 500 to Rs. 1.5 lacs in a given financial year, and can get facilities such as loan, withdrawal, and extension of account.
Any investor who is looking for a safe investment option to save taxes and earn guaranteed returns should open a PPF account.
Opening a PPF account can be done at either a Post Office or with any nationalized bank like the State Bank of India or Punjab National Bank, etc. Many private banks like ICICI, HDFC, and Axis Bank among others are also authorized to provide this facility. An investor needs to furnish a duly filled application form along with the required documents i.e. the KYC documents like identity proof, address proof, and signature proof. After submitting these documents, you can deposit a prescribed amount towards the opening of the account.
Features of PPF Account
The rate of interest that is provided on a PPF account is 7.90% p.a. for the current financial year. It is compounded on an annual basis. The interest is paid on March 31 and the PPF interest rate is set by the Finance Ministry every year. The calculation of interest is based on the minimum balance that is available between the close of the fifth day and the last day of the month.
Any individual who is a resident of India is allowed to open a PPF account. NRIs are not eligible to open PPF accounts. However, a resident Indian who has become an NRI after opening a PPF account can continue the account till maturity. Additionally, parents/guardians can also open PPF accounts for their minor children. Opening of joint accounts and multiple accounts are not allowed.
Following set of documents are required to be furnished for PPF account opening:
Each bank has a relatively different process for opening of PPF account. The general steps to be followed, however, remain the same. To open a PPF account online, you must follow the given steps:
Here are the steps to check PPF balance online:
PPF calculator is a handy tool when it comes to performing some of the most complicated PPF related calculations. Using the PPF calculator you can easily calculate the year-wise PPF returns you can earn by contributing to your PPF account over a pre-determined time period and with a specific frequency.
This is a versatile tool that can be found online and investors don’t need to use separate bank-wise calculators such as SBI PPF Calculator, PNB PPF Calculator, India Post PPF Calculator or HDFC PPF Calculator. This is because interest rate, maturity, taxation and withdrawal rules are determined by the government hence, remain the same irrespective of where the PPF account is opened.
To use a PPF calculator correctly, you need to input the following data:
After providing the above data into the PPF calculator, you must click on “Calculate” to get instant information about PPF maturity amount, PPF Interest earned, total PPF investment and much more.
There are seven varieties of PPF calculators which help in calculating 6 different types of computations of PPF. This depends on the usage and other elements while using the calculator.
PPF Maturity Calculator - This PPF calculator simply helps you calculate the time when the PPF matures for amount withdrawals.
Here are some of the common benefits of PPF calculators:
List of Banks that Allow PPF Account Opening
Here are some of the basic norms surrounding PPF nomination:
The facility to avail loan against the PPF account is available from a 3rd financial year up to 6th financial year from the date of opening the account. A loan can be availed at any time after the expiry of one year from the end of the financial year in which the account was opened but before the expiry of five years from the end of the financial year in which the account was opened.
Form D must be submitted to avail loan against the PPF account. The form requires details such as account number, the amount being borrowed, etc along with the undertaking that the amount will be repaid with interest within three years. The maximum amount of loan that can be availed against PPF accounts is 25% of the balance at the end of the 2nd financial year preceding the year in which the loan was applied for.
The interest rate payable on loan taken against PPF account is 2% higher than the prevailing interest rate on PPF account. The interest is not paid with the principal amount in EMIs. Once the principal amount is fully repaid the interest has to be repaid within 2 months. In case the loan is not repaid within 36 months, interest at 6% more than the prevailing interest rate of PPF account is charged. The second loan can be obtained only after the closure of the first loan.
The PPF Account becomes inactive if the minimum contribution of Rs 500 per year is not made:
Partial withdrawals from the PPF account can be made from the 7th Financial year from the year in which the account is opened. For example, if the account was opened on Jan 1, 2019, withdrawal can be made from the financial year 2025-26 onwards. However, it is suggested that one should check with the respective website of the bank to determine when a partial withdrawal is allowed. Some banks, such as ICICI and Axis, allow withdrawals after 5 years and some after 7 years (SBI and HDFC). Only one partial withdrawal is allowed per financial year. The maximum amount that can be withdrawn per financial year is the lower of the following:
a) 50% of the account balance as at the end of the financial year, preceding the current year, or
b) 50% of the account balance as at the end of the 6th financial year, preceding the current year.
One has to submit Form C to withdraw a partial amount from the PPF account. Information including account number, amount of money to be withdrawn, etc. is to be mentioned on the form. A declaration stating that no other amounts were withdrawn during the same financial year should also be submitted. In case, the account is in the name of the minor, additional declaration stating that the amount is required for the use of minor child who is still a minor and is alive. Passbook is also required to be submitted along with the form.
Premature Closure: Premature closure of PPF account is not permitted within 5 years of opening the account. Thereafter it can only be closed on specific grounds such as life-threatening ailments affecting the account holder, spouse, dependent children or parents. Supporting medical documents have to be produced to support a claim on these grounds.
The PPF account can be closed prematurely after completion of five financial years on the following grounds:
In case of death: In case of death of PPF account holder, the proceeds of PPF account can be claimed by the nominees/ legal heirs. The claimant should apply along with Form G. Form G requires information about the claim such as account number, nominee details, etc. Following documents are required to be submitted to claim the PPF account proceeds:
PPF account matures after 15 years from the end of the financial year in which the account was opened. At the time of maturity, the account holder has three options:
PPF is one of the investment vehicles which falls under the Exempt-Exempt-Exempt (EEE) category. This means that all the deposits made in the PPF account are deductible under Section 80C of the Income Tax Act. Also, the accumulated amount and interest is exempt from tax at the time of withdrawal.
It is important to note that a PPF account cannot be closed before maturity. A PPF account, however, can be transferred from one point of designation to another. Only in the case of the account holder’s demise can the nominee request for the closure of the account.
PPF and National Pension Scheme
Indian citizens only
Indian citizens, NRIs
No age limit
10-12% returns basis market conditions
Rs. 500 – Rs. 1.5 lakh annually
Rs. 6,000 annually
Applicable for a tax deduction
60 years of age
Govt-backed and safe
Could be impacted by market conditions
Indian citizens, NRIs, foreign nationals except for US and Canadian citizens
High returns basis market conditions
No fixed amount
No tax deduction, however, applicable rates could be lower depending on the category of MF
Moderate depends on market conditions
No eligibility criteria
6.5-8.25% ongoing interest rates, could differ across banks
Could range from 7 days to 10 years, differs across banks
1. Is PPF good investment?
PPF is a preferred tax saving option among salaried individuals. It is a good option for those who wish to take up long-term investments as the lock-in period for PPF is 15 years. However, it is not the only plan that helps you save on taxes, multiple other plans and schemes, such as the ELSS, also tend to offer high returns on investments.
2. How can I get maximum PPF benefit?
To get maximum PPF benefits, one should always make investments before the 5th of every month. Higher returns can be earned when the lump-sum investment is made at the start of financial year i.e, before 5th April every year.
3. Can a person have 2 PPF accounts?
No, one person cannot have 2 PPF accounts. However, a family is eligible to have multiple PPF accounts, a parent or guardian of the family can have individual accounts of their own and one of them can also open a PPF for a minor child (if they have any).
4. What is the PPF lock-in period?
Investments made to a PPF account have a lock-in period of 15 years. However, individuals can make a partial withdrawal from the PPF account after 5 years from the date of opening the account.
5. Can I withdraw PPF after 5 years?
The Government has amended the PPF scheme and propagated some positive changes regarding the withdrawal of balance from the account. You can now withdraw the whole amount and close your PPF after 5-years.
6. Can I invest more than Rs.1.5 lakh in PPF?
Yes. You can invest more than Rs. 1.5 lakh in the PPF account in a particular year but no interest or tax benefit will be earned on the excess amount. This is because, according to Section 80 C, the total tax deduction per financial year is 1.5 lakh only.
7. Can a senior citizen open a PPF account?
There is no fixed upper age limit for opening a PPF account. Any Indian resident can open a PPF account and start investing.
8. How long can I extend my PPF account for?
PPF accounts have a maturity period of 15 years. However, this can be extended for as long as the account holder wishes to continue it. Extensions can be done for 5 years at a time. E.g. if an account matures on March 31st 2015, it can be extended till March 31st 2020. The next extension will be until March 31st 2025 and so on.
Public Provident Fund (PPF) scheme is a long-term investment option which offers an attractive rate of interest from time to time and returns on the amount invested. The interest earned and the returns are not taxable under Income Tax. One has to open a PPF account under this scheme and the amount deposited during a year will be claimed under section 80C deductions.
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