A PPF (Public Provident Fund) account is a long-term investment option. It is a plan available to all resident Indian citizens. The investment scheme is not available for NRIs (Non-Resident Indians). However, if an account is opened by a resident Indian before attaining an NRI status, the account can continue. The account can be opened in a bank or post office. You can transfer the account from bank to post office or from one bank branch to another (either within the bank or inter-bank is permitted).
Benefits of PPF Account
Exemption from tax – The principal contributed up to Rs. 1.5 lakh per annum is exempted from the income tax under Section 80C. The interest earned on the PPF account will be credited on the 1st of April every year. This interest is exempted from taxation. Additionally, the maturity proceeds of the account (at the end of 15 years or on the closure of account) are, also, exempt from taxation.
Easy to open an account – You can open a PPF account at a bank branch or post office. The account can be transferred from post office to bank or vice versa.
Easy to maintain an account – The PPF account can be maintained very easily. The minimum annual contribution is Rs. 500 and the maximum annual contribution is Rs. 1.5 lakh.
Transfer of account – The account can be transferred from one location to another location. You will be required to provide the necessary documentation to accomplish the change. If you have been transferred to another place by your employer, you should provide a copy of the transfer order and a written request to the bank branch to initiate the transfer.
Documents Required to Open a PPF Account
To open a PPF account, the following documents are required:
- An Identity proof
- A Residence proof
- PAN Card
- Aadhaar Card
- Passport size photographs (2 Nos.)
- Pay-in-slip (available at the bank branch/post office)
- Nomination form
You can submit your PAN card, driving license, passport, or voter ID card as identity proof.
As an address proof, you can submit your electricity bill, telephone bill, or ration card.
You can fill the nomination form so that the amount will be paid to the nominee, in the unfortunate event of your death or due to any permanent disability.
You are advised to carry the original along with the Xerox copies. The original documents will be verified by the authorities and they will be returned immediately. You should submit the self-attested Xerox copies of the certificates.
After opening the public provident fund, a passbook will be issued by the bank/post office. The passbook contains information such as the name of the account holder, the account number, photograph and the balance. It will have the information about the bank or post office. The transactions made in the PPF account will be updated in the passbook. You can also access the account information if you have online banking facility.
If you have opened the account with SBI, the account will be linked to your savings account. At the maturity of the fund, the proceeds will be transferred to your savings account.
It is more convenient to open a public provident fund account with a bank branch than a post office. If you open an account with the bank branch, you can transfer the funds online. Thus, you will not have to visit the branch for a single transaction. It will save you time, effort and money.
Eligibility to Open the PPF Account
Indian citizens can open a PPF account. The account can be opened by individuals only. A person cannot open more than one account. A minor can open an account, in which case it will be operated by the parent or guardian. The minor will be able to operate the account after attaining 18 years of age. The minor should submit his/her PAN card and Aadhaar card after completing 18 years so that she/he will be able to operate the account without any hiccups.
A father can be the custodian of a child’s account. Thus, the father can have his own ppf account and another account can be opened in the name of the child. However, a parent cannot be a custodian of more than one child’s account. A mother can be the custodian of another child’s account and she can maintain her own account as well. Thus, it is possible to manage 4 PPF accounts by a small family (father, mother, and two minor children). You should understand the fact that mother and father cannot open PPF account with the same child.
Each PPF account has the potential to save up to Rs. 1.5 lakh. If you open an account in the name of your child, you can contribute up to 1.5 lakh to the child’s account. If you contribute to Rs. 1.5 lakh to your account, the maximum tax exemption is Rs. 1.5 lakh only. You will be able to earn the fixed interest, on both accounts, as declared by the government on annual basis.
You can open a PPF account even if you contribute to the EPF (Employees Provident Fund) and NPS (National Pension Scheme) account. However, you should understand the fact that all these long-term plans are eligible for tax exemption under Section 80C only. Hence, you should open and maintain the appropriate accounts, as per your needs.
The greatest advantage with the PPF account is its tax saving potential. It is the only scheme which gives EEE (Exemption-Exemption-Exemption) facility. You will get an exemption for the premium amount contributed on an annual basis. There will be an exemption on the interest earned on the PPF account on an annual basis. The entire proceeds after the 15-year term are exempted from the tax, as well.
The maturity amount can be used by the PPF member as per his/her needs. There is no restriction on the usage of the amount.
The maturity proceeds of the PPF account are secure and not attached to the court order. However, if you owe the income tax department, the money can be attached to the extent of your liability. If you take a personal loan from others, the proceeds of the PPF account cannot be claimed. Thus, the public provident account offers the highest level of security.
The interest on the public provident fund is declared by the Government of India at regular intervals. As the account is sponsored by the Government of India, there will be the highest level of safety.
An Online Account with ICICI Bank
A public provident fund can be opened online without submitting a physical copy. The ICICI Bank offers the facility to open an account completely online. If you have a PAN card, an Aadhaar and the mobile number linked to aadhaar card, an account can be opened in few minutes.
It is a completely online process and you will get access to your new PPF account instantly. The bank has made the arrangements to verify your credentials with the UIDAI (Unique Identification Development Authority of India).
After entering the PAN card, aadhaar number, mobile phone number and date of birth, you will have to enter the OTP (One-Time Password) sent to your mobile phone. You can find more information on the ICICI Bank website.
An Online Account with SBI or Axis Bank
You can, also, open public provident fund account with SBI, Axis Bank, and other banks the internet. The process will help you reduce the paperwork to some extent. Hence, it can be termed as a semi-online process. You will be able to register your details online and a form generated on the website should be printed and submitted to the respective bank branch for further processing of the online application.
The first payment should be paid offline by filling the pay-in-slip. The remaining payments can be done online or offline, as per your convenience. You can contribute to the PPF account in a maximum of 12 installments in a financial year.
Benefits Of the Online Account
After opening the online account, you can access your account from your desktop, laptop, tablet or mobile phone as per your convenience. You can find your eligibility to apply for the loan. It is possible to withdraw 50% of the money after maintaining the account for at least 7 years.
PPF account is an ideal investment instrument to take care of your retirement needs. As the lock-in period is 15 years, it will help you save money over a long period. You can continue the account for another 5-year block after the completion of 15 years. The same interest rate and tax exemptions are available on the PPF account after an extension of 5 years. You can renew the account for any number of 5-year blocks, as per your convenience. The interest earned on the PPF account is exempted from the tax. Even if you migrate to another country, it is possible to maintain the account without any hassles. The account is safe and a must-have for your financial portfolio.
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