A PPF or Public Provident Fund is a tax-free savings scheme offered by the Government of India, wherein interest on the account is set for every quarter and is paid by the government. Public provident fund is a popular investment scheme among investors courtesy its multiple investor-friendly features and associated benefits. It is a long-term investment scheme popular among individuals who want to earn high but stable returns. The applicable interest rate on PPF for the second quarter of the year, 2020-21 i.e. from 1st July to 30th September 2020 is fixed at 7.1%. The interest rate for April to June 2020 was 7.1%.
What are the Features of A PPF Account?
- A subscriber can deposit any amount between Rs.500/-(minimum) and Rs. 1,50,000/-(maximum) in a financial year.
- Current Rate of Interest Payable.
- Loan facility is available from 3rd financial year up to 6th financial year.
- One withdrawal is permissible every year from 7th financial year.
- Account matures on completion of fifteen complete financial years from the end of the year in which the account was opened.
- After maturity, account can be extended for any number of a block of 5 years with further deposits.
- Account can be retained indefinitely without further deposits after maturity with the prevailing rate of interest.
- Deposit may be PPF account qualified for deduction under Sec- 80 C of Income Tax Act.
- Interest earned in PPF account is completely exempted from Income Tax under Sec-10(15 of Income tax Act).
- The amount in the PPF account is not subject to attachment under any order or decree of a court of law.
What are the latest PPF Interest Rates 2020?
PPF is a fixed income investment. The interest rate on PPF account is notified by the central government every quarter.
|PPF Interest Rate for Q2 (July to September) of FY 2020-21 is 7.1%|
Recent changes in PPF interest rates:
|Period||Interest Rate (%)|
|July to September 2020||7.1|
|April to June 2020||7.1|
|January to March 2020||7.90|
|October to December 2019||7.90|
|July to September 2019||7.90|
|April to June 2019||8.0|
|January to March 2019||8.0|
What is the Eligibility Criteria for PPF account?
Indian citizens residing in the country are eligible to open a PPF account in his/her name. Minors are also allowed to have a Public provident fund account in their name, provided it is operated by their parent.
Non-residential Indians are not permitted to open a new PPF account. However, any existing account in their name remains active till the completion of tenure. These accounts cannot be extended for 5 years – a benefit available to Indian residents.
What is the Minimum and Maximum Contribution required in PPF account?
The minimum annual contribution that can be made to a PPF account is Rs. 500 while the maximum is capped at Rs. 1.5 lakh. The maximum limit applies to contributions made by a person for himself and for a minor child, both. There can be a maximum of 12 contributions in a year.
Minimum PPF Tenure?
PPF account matures after the expiry of 15 years from the end of the financial year in which the account was opened. For example, if the PPF account was opened on Jan 1, 2010, it will mature on March 31, 2025, i.e. 15 years from March 31, 2010. At maturity, you can extend the PPF account indefinitely in blocks of 5 years at a time.
How to Open a PPF Account?
Both offline and online procedures are available for an individual provided he/she meets requisite parameters mentioned in the eligibility criteria. Activating PPF online can be done by visiting the portal of a chosen bank or post office.
The following documents have to be produced at the time of activation of a public provident fund account –
- KYC documents verifying the identity of an individual, such as Aadhaar, Voter ID, Driver’s License, etc.
- PAN card.
- Residential address proof.
- Form for nominee declaration.
- Passport sized photograph.
What are the Documents Required for Opening a PPF account?
- 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
What are the Benefits of opening a PPF Account?
- Being a Government-backed scheme, the principal and interest amounts in your PPF account are guaranteed and safe
- Contributions to the account of up to Rs 1.5 lakh per annum and interest earned on the savings are both tax-free
- The interest rate for the PPF account is declared by the Government every quarter. It must be noted that PPF returns are higher than FD rates of many banks in that period
- The PPF account is immune from attachment from any order or decree of any court under the Government Savings Banks Act, 1873
How to Withdraw Funds from PPF account?
There are multiple clauses that an individual must adhere to in case he/she wants to withdraw funds from the PPF account.
Mandatory lock-in of 15 years is imposed on the principal amount invested in such plans. In case of emergencies related to specific end-uses, partial withdrawal can be made. However, this amount can only be extracted after the completion of 5 years of activation of the account. Up to 50% of the total balance can be withdrawn in one transaction each financial year succeeding in the 4th year.
Investors should note that funds invested in a PPF account cannot be liquidated before the completion of the maturity period. Individuals looking for long-term risk-free investment options providing stable yields can easily opt for this government-backed instrument.
How to check PPF Balance?
Here’s how you can check your PPF balance online:
- Before you begin, ensure 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.
What are the List of Banks where you can open a PPF Account?
|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|
How to Revive a 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 INR 50 for each year the account has been inactive has to be paid.
- Arrears of minimum amount of INR 500 for all the years the account has been inactive have to be paid.
Frequently Asked Questions on PPF accounts
Q1. Please tell us if PPF is a good investment?
Ans. PPF is by far the most common voluntary tax saving option that every other salaried person opts for. 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.
Q2. How can I get maximum PPF benefit?
Ans. In order to obtain 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.
Q3. Can we invest more than 1.5 lakh in PPF?
Ans. More than 1.5 lakh can be invested 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.
Q4. Can I withdraw PPF after 5 years?
Ans. In 2016, the Government 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.
Q5. Can a person have 2 PPF accounts?
Ans. 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).
Q6. Can I withdraw my PPF before maturity?
Ans. PPF account can be withdrawn only at the time of maturity. However, the PPF amount can be withdrawn after completion of 5 years of active contribution. Earlier the PPF amount was locked for 15 years.
Q7. Can a senior citizen open a PPF account?
Ans. No maximum age limit is set for the PPF account opening. Any Indian resident can open a PPF account and start investing.
Q8. What is the minimum amount for a PPF account?
Ans. The minimum amount for opening a PPF account is as low as Rs. 500.
Q9. What is the PPF lock-in period?
Ans. 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.