PPF - Public Provident Fund

What is PPF?

PPF, or Public Provident Fund, is a reliable investment option backed by the Government of India. It is a savings scheme that is designed for long-term goals like retirement, marriage, or buying a house. 

A PPF account ensures the safety of your principal amount while growing your money through annual compounding at a fixed interest rate. It also provides tax benefits under Section 80C of the Income Tax Act, 1961. This tax-free investment is ideal for those seeking secure and steady returns while building a strong financial future.

Why is a PPF Account Important for You?

A Public Provident Fund scheme is an essential investment plan for individuals looking to save securely while enjoying various benefits.

Following are the key reasons why a PPF account is important:

• Guaranteed Safety: A PPF account is a risk-free investment backed by the Government of India, ensuring your money is secure and unaffected by market fluctuations.

• Tax Benefits: Investments up to ₹1.5 lakh per year qualify for tax deductions under Section 80C of the Income Tax Act. Additionally, the interest earned and the maturity amount are completely tax-free.

• Wealth Growth: The 15-year lock-in period encourages disciplined saving. The annual compounding of interest helps your savings grow significantly over time. You can also extend the account in 5-year blocks after maturity.

• Flexible Contributions: You can open a PPF account with a minimum deposit of ₹500 per year. The maximum annual PPF investment limit is ₹1.5 lakh, which can be deposited in one lump sum or multiple installments.

• Access to Funds: While the money is locked in for 15 years, loans can be taken against the PPF balance after 3 years. Partial withdrawals are allowed after 6 years for emergencies or major expenses like education or medical treatment.

PPF Account Details

NOTE: You can use the PPF calculator to calculate the returns and maturity amount of your contributions to the Public Provident Fund (PPF).

1. PPF Investment Amount 

   • A minimum deposit of ₹500 and a maximum of ₹1.5 lakh per financial year is required.

   • Deposits can be made in lump sum or up to 12 installments annually.

   Importance of Yearly Deposits

   • To keep the PPF account active, at least ₹500 must be deposited every financial year.

   • Failure to do so leads to account deactivation, which can be reactivated with penalties and missed contributions.

2. PPF Investment Tenure

   • A PPF account comes with a mandatory lock-in period of 15 years, during which the funds cannot be fully withdrawn.

   • After the 15-year lock-in, the tenure can be extended in 5-year blocks, allowing flexibility for long-term investors.

   • This extension option ensures the continuity of tax-free returns and compounding benefits.

3. PPF Interest Rate

   • The PPF interest rate is set by the Government of India and is revised quarterly.

   • The current interest rate of PPF account is 7.1% per annum as of December 2024, which is higher than most regular savings accounts.

   • Interest is compounded annually and credited at the end of the financial year.

   • The earned interest is exempt from income tax, making it a lucrative investment option.

   

4. Tax Benefits of a Public Provident Fund (PPF)

   The Public Provident Fund tax exemptions make it an attractive investment option for individuals in India. Let us learn about them below:

   • Tax Deductions on Contributions: PPF investments of up to ₹1.5 lakh per financial year qualify for tax deductions under Section 80C, reducing taxable income.

   • Tax-Free Interest Earnings: Interest earned on the PPF balance is completely tax-free, enhancing overall returns.

   • Tax-Exempt Maturity Amount: The entire maturity amount, including principal and interest, is exempt from taxes, ensuring full access to savings at the end of the tenure.

   • Exempt-Exempt-Exempt (EEE) Status: It offers triple tax benefits, where the PPF Investments, interest earned, and maturity proceeds are all tax-free.

   • No Wealth Tax: Funds in a PPF account are not subject to wealth tax, adding to the PPF account benefits.

5. Eligibility Criteria to Open a PPF Account

   The following conditions must be fulfilled to open a Public Provident Fund Account (PPF Account):

   • Resident Individuals Only: Only Indian residents can open a PPF account.

   • Age Limit: Both adults and minors are eligible. A guardian can open an account on behalf of a minor.

   • One Account Per Person: Only one PPF account is allowed per individual, except for accounts opened for minors.

   • Non-Residents Not Eligible: Non-Resident Indians (NRIs) cannot open a PPF account. However, accounts opened before becoming an NRI can be continued till maturity.

   • HUFs Not Eligible: Hindu Undivided Families (HUFs) cannot open a PPF account.

6. Documents Required to Open a PPF Account

   You require the following documents to open a PPF Account with a recognised bank branch or Post Office: 

   • KYC documents (choose one):

     • Aadhaar Card

     • Voter ID

     • Driver's License

   • PAN Card

   • Residential Address Proof

   • Bank Account Details

   • Form for Nominee Declaration

   • Passport-sized Photograph

7. How to Open a PPF Account Online?

   Follow the steps mentioned below to open a PPF account online:

   • Step 1: Log in to your net banking account on the bank's official website.

   • Step 2: Go to the 'Investments' section and select 'Public Provident Fund (PPF)'.

   • Step 3: Fill in your personal details (name, date of birth, address).

   • Step 4: Add your nominee and their details.

   • Step 5: Choose your initial deposit amount (minimum Rs. 500).

   • Step 6: Review the details and submit the application.

   • Step 7: Enter the OTP sent to your mobile to confirm the account.

8. PPF Calculator

   A PPF calculator is a financial tool that helps you calculate the maturity amount of your Public Provident Fund (PPF) investment. It takes into account the following factors to estimate the maturity amount:

   • Your invested amount

   • PPF interest rate

   • Tenure of your investment

   A PPF calculator can be a helpful tool when you are planning your PPF investment; it helps you:

   • Estimate your PPF returns.

   • Plan your PPF investments.

   • Evaluate different PPF deposits, tenures, and interest rates.

   

9. Loan Against PPF Account

   • Loans can be availed from the 3rd to the 6th financial year of the account.

   • The maximum loan amount is 25% of the balance at the end of the 2nd financial year preceding the loan application year.

   • Loans must be repaid within 36 months, with an interest rate 1% higher than the PPF interest rate.

   • A second loan can be taken if the first loan is fully repaid before the 6th year.

10. Premature Exit from PPF Scheme

    • Premature closure of the account is allowed after 5 years under specific conditions:

      • For treating life-threatening illnesses of the account holder or family.

      • To fund higher education of the account holder or children.

    • A 1% interest penalty is applied on premature closures, reducing the returns earned.

11. Nomination Facility for PPF Account

    • The PPF account holder can nominate one or more individuals.

    • Nominees can be assigned specific shares of the account balance.

    • The nomination can be updated or changed at any time by submitting the necessary form to the bank or post office.

12. Transferability of PPF Account

    • PPF accounts are transferable between banks and post offices.

    • This ensures convenience for account holders who relocate or wish to switch service providers.

    • The transfer process does not impact the account balance, tenure, or other PPF benefits.

13. PPF Withdrawal

    • Full PPF withdrawal of funds is only allowed after the 15-year lock-in period ends.

    • Partial withdrawals are allowed after 5 years, for specific needs like medical emergencies or higher education.

    • Up to 50% of the balance at the end of the 4th preceding year or the previous year can be withdrawn in one transaction per financial year.

14. How to Make Partial Withdrawals from a PPF Account?

    To withdraw money from your PPF account, follow these steps:

    • Step 1: Obtain Form C (withdrawal form) from your bank or post office.

    • Step 2: Fill in the withdrawal amount and choose the payment mode (cheque or direct credit to your bank account).

    • Step 3: Submit the completed form with your PPF passbook to the bank or post office.

    • Step 4: The approved withdrawal amount will be credited to your account or given as per your preference.

15. What is a Partial Withdrawal Form/ Form 3/ Form C?

    Form C is also known as the Partial Withdrawal Form or Form 3. It is a form that PPF you need to fill out to withdraw money from your PPF account before maturity.

    The Form C has the following three sections:

    Sections	Details to Enter
    Section 1: Declaration	Account number and withdrawal amount. Mention years since the account was opened.
    Section 2: Office Use	Account opening date Current PPF balance Date of previous withdrawal Available withdrawal amount Approved withdrawal amount Date and signature of the approving authority
    Section 3: Bank Details	Bank information for direct credit Enclose a copy of the PPF passbook with the application

16. How to Close a PPF Account?

    A PPF account can be closed only upon completion of the maturity period, which is at the end of 15 financial years. 

    Here are the steps to close a PPF account:

    • Step 1: Obtain the PPF account closure form from your bank, post office, or their official website.

    • Step 2: Fill out the form with required details:

      • PPF account number

      • Your name and address

      • Nominee’s name and address

      • Reason for closure (optional)

    • Step 3: Attach your PPF passbook to the form.

    • Step 4: Submit the form and passbook to the bank or post office.

    • Step 5: After processing, the account balance will be credited to your bank or post office savings account.

17. How to Check PPF Balance Online?

    To check your PPF account balance online, follow the steps mentioned below:

    • Step 1: Login to the official website of your bank or post office holding the PPF account.

    • Step 2: Go to the 'PPF Account' section.

    • Step 3: Enter your login credentials.

    • Step 4: Check your PPF account balance and transaction history.

18. How to Check PPF Balance Offline?

    You can follow these steps to check your PPF account balance offline:

    • Step 1: Obtain your PPF passbook from the bank or post office.

    • Step 2: Visit the bank branch or post office where you opened your PPF account.

    • Step 3: Update your passbook during operating hours.

    • Step 4: Your passbook will show all credit/debit transactions and the current balance.

19. How to Revive Your Inactive PPF Account?

    • Step 1: Submit a written request to the post office or bank where your PPF account is held.

    • Step 2: Pay a fine of Rs. 50 for each year the account has been inactive.

    • Step 3: Clear any outstanding balance of at least Rs. 500 for each year the account was inactive.

    • Step 4: Once the payment is made and the request processed, your PPF account will be revived.