How to Open PPF Account in Post Office

The Indian Postal System efficiently reaches every remote corner of the country. The Indian Postal System has been at the forefront when it comes to delivering services right from insurance, banking to the savings schemes such as the Public Provident Fund.

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What is a Public Provident Fund?

The Public Provident Fund (aka PPF) is an opulent investment scheme amongst the investors with its multiple investor-friendly features and benefits. The PPF is a long-term investment that is popular among all individuals who wish to earn high and stable returns. When it comes to opening the PPF account, the safekeeping of the principal sum is the prime objective of the individuals.

It is a secure deposit scheme that also offers tax exemptions and lucrative interest rates. The PPF account can not only be opened in the private and public banks but also it can be opened through post offices as well.

Features of Post Office PPF Account

The following are some of the key features of opening the PPF account in the post office:

  • In a PPF account, the maximum deposit permitted is Rs 1.5 lakh in a financial year.
  • The number of deposits permitted into the post office PPF is capped at 12 yearly.
  • The Public Provident Fund is an EEE investment wherein the principal sum invested, the maturity amount and the earned interest remains tax-free.

Benefits of Post Office PPF Account

The following are the benefits of opening the PPF account in the post office:

  • Compared to other savings scheme the interest rate of the post office account is higher. The current rate of interest is 7.1 per cent per annum with effect from April 01, 2020, and is compounded yearly.
  • As this is a government-backed scheme of savings, the investors can enjoy secure long-term investments.
  • The maturity period for the PPF account is 15 years excluding the financial year of opening the account. It can be extended in blocks of 5-years after the date of maturity originally has been reached.
  • One can also avail the facility of nomination.
  • The premature withdrawals are permitted after the five continuous years of investment. Under special circumstances, the premature closure of the PPF account is accessible.
  • From the third financial year, the facility of loan can be availed.

Understanding Deposit in the Post Office PPF Account

As discussed, the minimum deposit amount is Rs 500 and the maximum deposit sum is Rs 1.5 lakh in a financial year.  The maximum limit of Rs 1.5 lakh will be inclusive of the deposits made in the account.

The sum can be easily deposited in any number of installment in a financial year in multiples of Rs 50 and a maximum up to Rs 1.5 lakh.  The PPF account can be easily opened by cheque/ cash and in case of a cheque, the realization date of the cheque in the account of the government will be the opening date of the account or the subsequent deposit in the account. The deposits also qualify for deductions within Section 80C of the IT Act.

Interest Rate on PPF Account

The interest will be applicable as per the notification of the Ministry of Finance every quarter.  The interest rate is calculated for the calendar month upon the lowest balance in the account between the fifth day close and month-end.

The interest will be then credited to the account at the financial year-end. Besides, the interest will be credited to the account towards the end of each financial year where the account stands at the financial year-end that is in case the account has been transferred from the bank to the post office or vice versa. The interest earned remains tax-free under the IT Act.

Who Can Open the PPF Account?

The PPF account in the post office can be opened by any Indian citizen. It can also be opened by a legal guardian on behalf of the minor or a person who does not have a sound mental condition.

It is also to be noted that only one PPF account can be opened across the nation either in any bank or the post office.

Documents Required

An individual would require the following documents to open the PPF account in the post office:

  • The nomination form- Form E
  • Passport size photographs
  • Address proof- Aadhar card, Passport, Voter ID or Driving license
  • Identity proof- Aadhar card, Passport, Voter ID or Driving license
  • PAN Card

Step by Step Process to Open a PPF Account in the Post Office?

The process to open the PPF account in the post office is presently paper-based. Listed below are the key steps to open the PPF account in the post office:

  • Visit the nearest post office, get the application form and fill it out.
  • Self attests all the required KYC documents and then submit the form.
  • Deposit the initial amount through draft or cheque for opening the account. The minimum deposit amount is Rs 500 in one financial year and the maximum deposit is Rs 1.5 lakh.
  • For the verification process, ensure that the individual carries KYC documents.
  • Once the post office PPF account is opened, a passbook will be provided, which will have important details such as the account number of the PPF, balance, and so forth.

How to Deposit Money in the Post Office PPF Account?

The Post office PPF account holders can easily deposit the money online via the India Post Payment Bank application. Listed below are the steps to deposit money in the post office PPF account:

  • Install and likewise set up the IPPB app from the play store.
  • Next, add money from the bank account to the IPPB account.
  • Navigate to the DOP service station.
  • Select the Public Provident fund to be accessed
  • Enter the DOP customer ID and the Public Provident Fund account number.
  • Enter the amount that needs to be deposited and then select the option of ‘Pay’.
  • Verify all the details and then click on ‘Submit’.

How to take Loan in the Post Office PPF Account

The loan can be taken only after the expiration of one year from the end of the financial year in, which the primary subscription was made that, is in case an account was likely opened during 2010-2011 then the loan can be taken in 2012-2013.

The loan can easily be taken before the expiry of 05 years from the year-end in, which the first subscription was made. The loan can be only taken until 25 per cent to the credit and the second year-end directly the year wherein the loan has likely been applied that is if the loan was taken during 2012-2013 the 25 per cent of the balance credit on March 31, 2011.

Only one loan is allowed to be taken in a financial year. The second loan will not be granted until the first loan has been repaid. When the loan is repaid within thirty-six months of the loan taken, then a 1% per annum loan interest rate will be applicable. And if it is repaid after thirty-six months, the loan interest rate will be 6% from the loan disbursement date.

Withdrawal in the Post Office PPF Account

During a financial year, a subscriber can make one withdrawal after five years excluding the opening year of the account. For instance, if the account has been opened during 2010-11 then the withdrawal can be taken after or during 2016-17.

The sum of withdrawal can be taken up to 50 % of the balance at the credit words the end of the fourth preceding year or the preceding year-end, whatever is lower.

Premature Closure of the Post Office PPF Account

The premature closure will be permitted after 5-years from the year-end in, which the account is opened subject to the listed below conditions:

  • In case of any life-threatening disease of the account holder, dependent children or spouse.
  • In the case of higher education of the account holder or the dependent children.
  • In case the residential status of the account holder is changed.

During premature closure, a 1 per cent interest rate will be deducted from the account opening date or the extension date. The account can be closed on the mentioned above conditions by submitting the form prescribed along with the passbook at the post office concerned.

In case the account holder passes away, the account will be closed and the nominee or the legal heir will not be permitted to continue deposit in the account. During the closure because of death, the Public Provident Fund interest rate will be paid until the preceding month-end in, which the account will be closed.

Written By: PolicyBazaar - Updated: 01 July 2021
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