Everything You Need to Know About Public Provident Fund

The Public Provident Fund Scheme was introduced in 1968 by the Ministry of Finance, and is a tax saving avenue that offers an interest rate of 7.6%. Since the Public Provident Fund was introduced to encourage savings among salaried individuals, the minimum amount of deposition in PPF account is very affordable. One of the major benefits of investing in PPF account is that it provides tax deduction, and as a government backed scheme, is easy to understand and the money put in a PPF account is safe.

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Thus, due to all these benefits offered by the Public Provident Fund, it has become a popular investment option for the majority of individuals in India.

An individual can open a PPF account at any authorized bank (Government and Private) and post office. In order to open an account the individual is required to fill the form completely, provide all the relevant documents and deposit the required amount in the branches that have been authorized for the same.

The government sets the interest rate for PPF accounts. The interest rate associated with a Public Provident Fund account, keep changing for the entire tenure of the holding.

Let’s provide you some insight in to the key features and benefits offered by Public Provident Fund.

Some of the Salient Features of Public Provident Fund is:-

  • The Public Provident Fund offers an interest rate of 7.6% per annum.
  • The tenure of a PPF account is 15 years.
  • The minimum annual deposit amount is Rs. 500, whereas the maximum annual deposit amount is Rs. 1.5 lakhs.
  • The public provident fund offers a loan facility from 3 years to 6 years.
  • The renewal of extra 5 years is allowed at a time.
  • After the completion of 7 years with a PPF account, an individual can make one withdrawal yearly. The complete withdrawal of the fund can be made once the tenure of the account is complete and has matured.
  • The interest offered under a PPF account is applicable for tax deductions. Moreover, the money deposited in the account is also eligible for tax deductions under section 80C of Income Tax Act. The withdrawals made towards the PPF account is also tax free under wealth tax.
  • The process of transferring funds between the bank branches and the post office is very simple and free of cost. 

Benefit of Investing in Public Provident Fund

Here we have discussed some of the key benefits offered by PPF account.

  • Public Provident Fund is an attractive long term investment with deposit tenure of 15 years, and it provides a lock in period of 7 years. With attractive interest rates compounded yearly, the PPF tends to make effective returns as compared to the bank FD’s.
  • Public Provident Fund is a great retirement planning option, as with a disciplined style of saving, you can create a good financial cushion for your future and both tax free returns and capital appreciation certainly add to it.
  • Apart from working as a great retirement planning option, Public Provident Fund also provides tax exemption on the money deposited and withdrawals made under section 80C of Income Tax Act.
  • Being a government backed scheme, Public Provident Funds include low risk of default and is the safest investment option for financial planning.
  • One can open a PPF account at any nationalized and authorized government and public sector bank and post office. Moreover, now one can open a PPF account online too.
  • As a government backed scheme, court orders or creditors can’t lay claim to public provident account.

Eligibility Criteria to Open a PPF Account:-

    • PPF account can be opened individually. The residents of India from the age group of 18 years and older, can subscribe for a PPF account. The scheme does not provide any upper age limit to open an account.
    • Public Provident Fund can also be opened for minors (below 18 years of age). The maximum deposit limit annually is Rs. 1.5 lakhs, made in both minor and guardians account, collectively. However, the scheme has a limitation under which grandparents cannot open a PPF account in their grandchildren names.
    • Non Residential Indians cannot open a PPF account, either. However, those individuals who already have an account and obtained their non-residential status after having a PPF account, can continue to deposit money in the account till the maturity. But, it is important to note that NRI’s are not allowed to extend the tenure of the account after maturity.
    • As effective from the year 2005, Hindu Undivided Family (HUF) cannot open a Public Provident Fund account.

 In order to open a PPF account it is important to keep all your documents handy. Here are the major documents that an individual should not be missing when registering for their PPF account.

      • KYC Document such as identity proof, signature proof, address proof.
      • Passport, PAN card, Aadhaar Card, Voter ID, Driving License, Utility Bill, employer’s Letter, Lease/rental agreement, ration card, bank account statement, signed cheque.
      • Passport size photograph.
      • A form to open an account along with a beneficiary form, if beneficiary is being named.

Opening a PPF account is very simple and hassle free. One can open a PPF account either at authorized banks, the post office or online. In the offline process to open a PPF account, an individual just needs to visit to the respective post office or a branch of bank that has been authorized for the same and get themselves enrolled.

 The online process of opening a PPF account is much simpler, as one does not need to go anywhere and can open an account with just few clicks. All they need to do is to visit the bank’s official website or through the third party providers of financial services.

To Sum Up

Public Provident Fund is a great financial tool that not only helps you save an ample sum for your life after retirement, but also works as a great tax saving investment in the long run.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
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