Public Provident Fund

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What Is Public Provident Fund?

Public Provident Fund Scheme is a tax-free savings scheme. It was introduced in 1968 by the Ministry of Finance in India. Public Provident Fund was formulated to encourage people to save and create a retirement fund so that they can have a financial cushion during the golden period of their lives. The interest earned on Public Provident Fund account deposits is tax-free. That is why Public Provident Fund Scheme is one of the best tax saving tools in India

Key Features of Public Provident Fund 

Features of Public Provident Fund Scheme

Public Provident Fund interest rate

7.8%

Plan Tenure

15 years

Initial investment Amount

Rs.100

Annual Deposit Amount

Rs.500 to Rs.1.5 Lakh

Deposit Periodicity

Annually for 15 years. In order to keep the account active, a deposit must be made annually.

Modes of Deposit

Cash, cheque, demand draft, NEFT can be used to make up to 12 installments in a year or a onetime installment. 

Nomination

Yes

Loan Facility

From 3rd year to 6th year.

Renewal

5 years at a time.

Joint accounts

No

Withdrawals

·         It is allowed annually from the 7th year onwards.

·         The complete amount can be withdrawn only at the time of maturity.

Tax Benefits

·         Earned interest is tax-free.

·         Amounts deposited are tax deductible under section 80C of the IT Act.

Fund Transfer

·         Funds can be transferred easily between bank or post offices branches for free.

·         Funds can’t be transferred between individuals.

 Best Public Provident Funds in India 

Public sector banks

Private sector banks

State Bank of India Public Provident Fund

State Bank of Travancore Public Provident Fund

State Bank of Hyderabad Public Provident Fund

State Bank of Mysore Public Provident Fund

State Bank of Bikaner and Jaipur Public Provident Fund

State Bank of Patiala Public Provident Fund

Allahabad Bank Public Provident Fund

Bank of Baroda Public Provident Fund

Bank of India Public Provident Fund

Bank of Maharashtra Public Provident Fund

Canara Bank Public Provident Fund

Central Bank of India Public Provident Fund

Corporation Bank Public Provident Fund

Dena Bank Public Provident Fund

IDBI Bank Public Provident Fund

Indian Overseas Bank Public Provident Fund

Oriental Bank of Commerce Public Provident Fund

Punjab National Bank Public Provident Fund

Union Bank of India Public Provident Fund

United Bank of India Public Provident Fund

Andhra Bank Public Provident Fund

Vijaya Bank Public Provident Fund

Punjab and Sind Bank Public Provident Fund

UCO Bank Public Provident Fu

ICICI Bank Public Provident Fund

Axis Bank Public Provident Fund

 Public Provident Fund Forms 

Listed below are the Public Provident Fund forms.

Public Provident Fund Form

Description

Form A

It is used to open a Public Provident Fund Account.

Form B

It is used to deposit money or repay loans taken against a Public Provident Fund Account.

Form C

It is used to make partial withdrawals from a Public Provident Fund Account.

Form D

It is used to file a loan request against a Public Provident Fund Account.

Form E

It is used to add a nominee to a Public Provident Fund Account.

Form F

It is used to make any changes to the nomination information linked to a Public Provident Fund Account.

Form G

It is used to claim funds in a Public Provident Fund Account by a nominee/legal heir.

Form H

It is used to extend the maturity of a Public Provident Fund Account.

Benefits of a Public Provident Fund Scheme

Here are the key benefits of investing in a Public Provident Fund Scheme.

  1. Fruitful Long-Term Investment- Public Provident Fund plans come with a tenure of 15 years and a freezing period of 7 years, hence this plan serves long-term investment goals. Its interest rates are formulated annually which yield effective returns making Public Provident Fund more rewarding than fixed deposits offered by banks.
  2. Accomplish Retirement Goals- Long policy tenure, tax-free compounded returns, & capital protection make Public Provident Fund a perfect option to accomplish one’s retirement goals with.
  3. Tax-free Advantage- The interest earned and withdrawals made by a Public Provident Fund account are absolutely tax-free.
  4. Minimal Risk- Backed by the government, Public Provident Fund comes with minimal risk.
  5. Ease of Accessibility- National and public sector banks, post offices and selected private banks offer the facility of opening PPF accounts. Also, Public Provident Fund account can be opened online.
  6. No attachment- Public Provident Fund account cannot be attached as per court order and creditors can’t claim PPF for the repayment of their loans.

Public Provident Fund Scheme: Rules and Regulations

There is a set of Public Provident Fund rules and regulations to govern the scheme. PPF rules 2018 have not seen any significant changes. Public Provident Fund rules cater to the eligibility criteria and documentation requirements for opening, maintaining and operating a Public Provident Fund account. It includes loan facility, withdrawals, extension and closure of accounts as well.

Mentioned below are the Public Provident Fund rules.

Documents Required for Opening a PPF A/C

Now that you have understood PPF rules, here are the documents required to open a Public Provident Fund account:

 KYC documents (identity proof, address proof & signature proof) are required for opening a PPF account. Mentioned below are the documents that are a pre-requisite for opening a Public Provident Fund account.

  • Latest Aadhaar Card, PAN Card, Driving License, Passport, Voter’s ID, Utility Bill, Employer’s letter
  • Latest Rent/Lease Agreement, updated bank account statements, Signed Cheque, Ration Cards
  • Passport Size photographs
  • Duly filled Form A (the account opening form). If nominees are being named, then duly filled Form E, must be attached as well.
  • For minors, either their birth certificate, or school certificate is required as a proof of age. 

Note- (If necessary) banks can ask for additional documents. In case of minors, age proof will be required i.e. the minors.

Eligibility Criteria

PPF rules offer the answer to the question- Who can open a PPF account? In order to open a PPF account, an individual must fulfill the parameters mentioned below.

  1. Resident Indians who are 18 years of age or above can open a PPF account. There is no maximum age of entry to open a PPF account.
  2. An individual is allowed to open 1 PPF account only.
  3. PPF account can be opened for individuals below 18 years of age (minors). There is a maximum limit of Rs. 1 Lakh 50 Thousand for the annual deposits made in the minor’s guardian’s account.
  4. Grandparents aren’t eligible to open a PPF account for their minor grandchildren, unless they are their legal guardians.
  5. While non-resident Indians can’t open a PPF account, account-holders who have left India and have obtained a non-resident status after opening a PPF account are eligible to maintain their PPF accounts until maturity.
  6. NRIs can’t extend their account duration upon maturity.
  7. Hindu Undivided Family (HUF) can’t open a Public Provident Fund account, w.e.f. 2005. The accounts opened by Hindu Undivided Families before May 13 2005, can be continued until maturity. Once they have reached maturity, they are not eligible to for further extensions.
  8. Foreigners can’t open a Public Provident Fund account.

It is an obligation to follow PPF rules and regulations for the smooth operation of your account. 

How to open PPF Account?

A public provident fund account can be opened online as well as offline. One can visit a post office/ preferred bank-branch or log in to his/her net banking account and open a Public Provident Fund Account. Operating a Public Provident Fund online is more popular among today’s tech-savvy netizens. While a Public Provident Fund Account can be opened for as low as Rs. 100, the minimum annual deposit in an account must be of Rs. 500.

Open PPF via Offline  

It is very easy to open a Public Provident Fund Scheme offline. A Public Provident Fund can be opened by visiting a branch of an authorized bank or post office. You need to get Form A, duly fill it, attach the required documents and submit it. In order to open a Public Provident Fund, an initial amount must be deposited. Authorized post offices and bank branches act as government agents since Public Provident Fund Scheme is a government funded scheme. 

Open PPF Account via Online

PPF online offers the ease of access to accountholders. In order to open a PPF online, visit your preferred authorized bank’s official website. If State Bank of India is your preferred bank, you can Google ‘PPF SBI’ and you will get search results that will guide you about opening your account under Public Provident Fund SBI.   

Opening a PPF online is subjected to the T&C (terms & conditions) set by the bank. 

Traditionally, PPF Scheme was set up only by physically visiting the authorized bank and post office branches. However, once net banking became popular among the masses, more accountholders are opting for the Public Provident Fund online using the net banking facility

Tax Benefits of Investing in the Public Provident Fund Scheme

PPF Scheme comes with sizeable tax benefits. These benefits make Public Provident Fund an attractive investment instrument for building a retirement corpus.

  1. Deposits made in a PPF account fall under the Exempt, Exempt, Exempt (EEE) tax category. The first E connotes a tax exemption on the invested amount in a Public PPF. The Second E connotes a tax exemption on income earned from the interest (or any other income) from a Public Provident Fund account. The Third E connotes a tax exemption on the earned income from the investment made in a Public Provident Fund account. 
  1. The Tax benefits will be as per section 80C of Income Tax Act. For the deposits made in a Public Provident Fund.
  2. Any amount withdrawn from a Public Provident Fund Scheme is exempted from wealth tax. 

Any amounts deposited the Public Provident Fund Scheme of a child or spouse qualifies for tax benefits.

 FAQs

1.  What are the factors that impact Public Provident Fund interest rate?

The PPF interest rate is affected by the prevailing economic scenario. Usually, it’s formulated to be higher than the inflation rate at a quarter’s premium or half percent (0.25% to 0.50%) of 10-year government bond rates.

2.  How is the Public Provident Fund interest rate formulated?

PPF account is a debt investment option offered by the government which offers a fixed-income. Therefore, even the PPF interest rate is formulated by the central government. Currently, the interest rate is 7.9%.

3.  What happens if I fail to make a deposit in a Public Provident Fund account in a year?

Failure to deposit a minimum of Rs. 500 annually in Public Provident Fund account will render your account deactivated. You can plan and deposit a lump sum once a year or you can plan your investment in 12 installments.

4.  What is the minimum and maximum limit for the deposits made in a Public Provident Fund.?

There are annual limits on the amount you can deposit.

Minimum Limit- Annually, the minimum limit of deposits to be made in a PPF is Rs 500.

Maximum Limit- Annually, the maximum limit of deposits is set at Rs. 1 Lakh 50 thousand.

5.  What if I want to Closure of Public Provident Fund account?

PPF can’t be closed before the maturity period i.e. before the end of year 15. In case a Public Provident Fund account is rendered inactive due to non-adherence of PPF rules, the accrued funds can’t be withdrawn until the end of the maturity period. On completion of the maturity period, the accrued funds along with the interest earned can be withdrawn and the account can be closed freely.

6.  How do I withdraw money from the Public Provident Fund Scheme?

If you need to withdraw funds from your Public Provident Fund Scheme, after the completion of 6 years, you can withdraw funds partially. The withdrawal limit is capped at the lower of:

  • 50 percent of the total deposit by the end of the 4th fourth year, counting back from the withdrawal year Or
  • 50 percent of the total deposit by the end of the year before the withdrawal. Per financial year, only one withdrawal is permitted.

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