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Introduction

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.

PPF Account Opening

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

  • Tenure: PPF account has a minimum tenure of 15 years, which can be extended in blocks of 5 years.
  • Balance: The account can be opened with just Rs. 100. Annual investments above Rs. 1.5 lakh will not earn interest and will not be eligible for tax saving.
  • Investment Limits: PPF allows a minimum investment of Rs. 500 and a maximum of Rs. 1.5 lakh for each financial year. Investments can be made in a lump sum or a maximum of 12 installments.
  • Deposit Frequency: Deposits into a PPF account has to be made at least once every year for 15 years.
  • Mode of deposit: The deposit into a PPF account can be made either by way of cash, cheque, Demand Draft, or through an online fund transfer.
  • Nomination: A PPF account holder can designate a nominee for his account either at the time of opening the account or subsequently.
  • Joint accounts: A PPF account can be held only in the name of one individual. Opening an account in joint names is not allowed.
  • Risk factor: Since PPF is backed by the Indian government, it offers guaranteed, risk­-free returns as well as complete capital protection. The element of risk involved in holding a PPF account is minimal
  • Who can invest in PPF – Any Indian citizen can invest in PPF. One citizen can have only one PPF account unless the second account is in the name of a minor. NRIs and HUFs are not eligible to open a PPF account.

Interest Rate on PPF

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.

Eligibility Criteria for PPF

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.

Documents Required for PPF Account Opening

Following set of documents are required to be furnished for PPF account opening:

  • PPF account opening form (Form A) can be obtained from specified bank branches or can be downloaded online.
  • ID proof
  • Address proof
  • Photograph of the account holder
  • Nomination form

PPF Online Registration Process

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:

  • An investor needs to have an account with the bank he is going to open the PPF account with
  • Log in to relevant net banking portal
  • Click in the option that allows to ‘Open a PPF Account
  • Choose the relevant option between a ‘self-account’ and a ‘minor account’
  • Enter the required information such as nominee details, bank details, etc.
  • Verify details like Permanent Account Number (PAN), etc. that is shown on the screen
  • After verifying the details, enter the amount that you wish to deposit in PPF account
  • You will be asked to set up standing instructions that enable the bank to deduct the amount at fixed intervals or in a lump sum
  • After you make your choice, you will receive an OTP on your registered mobile number
  • Once this verification is done, your PPF account gets opened. You are advised to save the account number that is displayed on the screen for future reference
  • Certain banks may even ask you to submit the hard copy of the details entered along with the reference number and submit it to the respective bank with your KYC details

PPF Balance

Here are the steps to check PPF balance online:

  • As a first step, make sure that your net banking with your bank account is active
  • Log in to your PPF account using your internet banking credentials
  • Once you log in, your current PPF account balance will be displayed on the screen
  • Logging in to your PPF account using internet banking allows you to transfer funds to your PPF account online, set up standing instructions for your PPF account, download your PPF account statement, submit your PPF loan application. etc.

PPF Calculator

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:

  • Tenure – Minimum 15 years to maximum 50 years with an option of extension in blocks of 5 years.
  • Payment Frequency – Payment frequency could be monthly, quarterly, half-yearly and annually. In case of quarterly deposits made every quarter, half-yearly deposits mean twice each year and so on.
  • Deposit Amount – This is the amount that is to be deposited in the account as per the deposit frequency. Thus, if the deposit amount is Rs. 1,000 and Deposit Frequency is monthly, total PPF deposit for the year will be Rs. 12,000 and automatically calculated by the PPF calculator.
  • Interest Rate – This is the PPF rate of return that you are expecting on your investment. In case you are wondering how to calculate PPF interest rate, you can check the latest PPF interest rates online.

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.

Types of PPF Calculators

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 fixed monthly investment calculator - This calculator helps investors to calculate their payable amount for contributing towards PPF every month. The tool requires individuals to enter the month of opening the account, the financial year of opening PPF account, fixed monthly investment or deposit, and finally requires individuals to submit the details.
  • PPF fixed yearly investment calculator – This calculator helps in calculating the payable amount for contributing towards PPF on a year on year basis, as the PPF interest rates do keep changing over time. The main details required on this tool include the financial year of opening the PPF account and fixed annual investment or deposit.
  • PPF variable yearly investment calculator - The variable yearly investment calculator requires individuals to enter basic information which includes financial year and amount deposited for each year. Also, the financial year of opening the PPF account has to be entered.
  • PPF Benefits Calculator - This PPF Calculator involves various elements that include a fixed annual contribution, interest rate in that year, age group of the individual, and total income of the individual.
  • PPF available loan calculator - This PPF loan calculator helps to compute the permissible loan amount, approximately. For this, the balance in the account has to be simply entered.
  • PPF available withdrawal calculator - Withdrawals are available to PPF contributors, once in a year from the PPF account after five years from the end of Financial Year in which the initial deposit was made expires. Both the withdrawal amounts before and after extension can be calculated on the online tool. Some websites have separate tools on the website.

PPF Maturity Calculator - This PPF calculator simply helps you calculate the time when the PPF matures for amount withdrawals.

Benefits of PPF Calculators

Here are some of the common benefits of PPF calculators:

  • This computing device allows users to make a clear idea about how much interest can be earned with the investment of a certain amount of money.
  • With the assistance of this calculator, you can be saved from paying a hefty tax.
  • We often find it difficult to decide on the maturity period of their investment and this problem is easily solved with the use of PPF calculator India.
  • It also offers estimation on total investment in a financial year.
  • To ensure that the user can get an accurate result, it is essential to provide the computing device with deposited amount along with the type of deposit i.e. fixed or variable.

List of Banks that Allow PPF Account Opening

  • Indian Overseas Bank
  • Allahabad Bank
  • ICICI Bank
  • Central Bank of India
  • Axis Bank
  • Canara Bank
  • State Bank of India
  • Union Bank of India
  • Bank of Baroda
  • Indian Bank
  • IDBI Bank
  • United Bank of India
  • Punjab National Bank
  • Dena Bank
  • Corporation Bank
  • Vijaya Bank
  • Oriental Bank of Commerce
  • Bank of Maharashtra
  • Bank of India
  • State Bank of Patiala
  • State Bank of Bikaner & Jaipur
  • State Bank of Travancore
  • State Bank of Hyderabad
  • State Bank of Mysore

PPF Nomination

Here are some of the basic norms surrounding PPF nomination:

  • Nomination can be made in favor of one or more person(s). In case, more than one person is appointed as a nominee, the percentage share of each nominee must be specified.
  • Nominations cannot be made for the minor’s PPF account. Parent, spouse, relatives, children, friends, etc. of the account holder can be nominated.
  • To add a nominee to the PPF account, the account holder must submit Form E 
  • Nomination can be made at any time during the tenure of the account. Change, cancellation, or alteration in nomination can be done through Form F.
  • Nomination forms need to be signed by the account holder and two witnesses. The signature of the nominees is not required.
  • After being duly filled, the form must be submitted at the appropriate bank/post office branch.

PPF Loan Facility

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.

Inactive PPF Account

The PPF Account becomes inactive if the minimum contribution of Rs 500 per year is not made:

  • A written request to reactivate the account should be submitted at the post office or the bank branch where the account is based
  • A fine of Rs. 50 for each year the account has been inactive has to be paid.
  • Arrears of minimum amount of Rs. 500 for all the years the account has been inactive have to be paid.

PPF Withdrawal

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.

PPF Account Closure

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:

  • Treatment of serious ailments or life-threatening diseases of the account holder, spouse or dependent children or parents
  • Higher education of the account holder or the minor account holder.
  • 1% interest will be deducted from the applicable interest rate on the premature closure of the PPF account

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:

  • In case where the account holder has made the nomination
    • Form G filled by all the nominees
    • Death certificate of the account holder
    • Passbook of the subscriber
  • In case where the nomination is not made by the account holder and claim is supported by legal evidence
    • Form G filled by legal heirs
    • Death certificate of the account holder
    • Succession Certificate, Letter of Administration or attested copy of the will
    • Passbook of the subscriber
  • In case where the nomination is not made by the account holder and the claim amount is less than Rs. 1 Lakh
    • Form G filled by legal heirs
    • Death certificate of the account holder
    • Annexure I to Form G (Letter of Indemnity) on stamped paper
    • Annexure-II to Form G (Affidavit) on stamped paper
    • Annexure III to Form G (Letter of Disclaimer on Affidavit) on stamped paper

PPF Account Maturity

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:

  • Withdrawal: The account holder can withdraw the PPF amount along with the interest accrued thereon. The entire maturity proceeds are exempt from tax.
  • Extension: A subscriber can extend the life of the PPF account indefinitely in blocks of 5 years at a time.  The subscriber has to submit a request to extend the account, with further contributions by submitting Form H. The choice of extension with contribution has to be made within one year from the date of maturity, otherwise, the default choice of extension without further contribution applies. Once the account is extended with contributions, the maximum 60% of the balance as on the date of extension of the account can be withdrawn. This amount can be withdrawn in one go or can be spread over several years. A maximum of one withdrawal can be made in a year.
  • Extension without further contribution: If no choice is made, then the default choice, .i.e. extension without further contribution applies. You do not need to fill any form to choose this option. A maximum of one withdrawal is allowed per year and any amount up to the total balance in the account can be withdrawn.

Tax Benefits on PPF

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.

Comparing PPF to Other Savings Schemes

PPF and National Pension Scheme

PPFNPS

Eligibility

Indian citizens only

Indian citizens, NRIs

Age

No age limit

18-60 yrs

Interest rate

7.9%

10-12% returns basis market conditions

Contribution

Rs. 500 – Rs. 1.5 lakh annually

Rs. 6,000 annually

Tax

Applicable for a tax deduction

Applicable for a tax deduction

Lock-in

15 years

60 years of age

Liquidity

Low

Low

Safety

Govt-backed and safe

Could be impacted by market conditions

PPF and Mutual Fund

PPFMF

Eligibility

Indian citizens only

Indian citizens, NRIs, foreign nationals except for US and Canadian citizens

Age

No age limit

No age limit

Interest rate

7.9%

High returns basis market conditions

Contribution

Rs. 500 – Rs. 1.5 lakh annually

No fixed amount

Tax

Applicable for a tax deduction

No tax deduction, however, applicable rates could be lower depending on the category of MF

Lock-in

15 years

No lock-in

Liquidity

Low

High

Safety

Govt-backed and safe

Moderate depends on market conditions

PPF and Fixed Deposit

PPFMF

Eligibility

Indian citizens only

No eligibility criteria

Age

No age limit

No age limit

Interest rate

7.9%

6.5-8.25% ongoing interest rates, could differ across banks

Contribution

Rs. 500 – Rs. 1.5 lakh annually

No fixed amount

Tax

Applicable for a tax deduction

No tax deduction, however, applicable rates could be lower depending on the category of MF

Lock-in

15 years

Could range from 7 days to 10 years, differs across banks

Liquidity

Low

High

Safety

Govt-backed and safe

High safety

FAQs

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.

End Note

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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