What is PPF?
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- 1 What is PPF?
- 1.1 Features of the PPF accounts
- 1.2 Eligibility criteria to open PPF account:
- 1.3 PPF Interest Rates for the Past 10 Years
PPF Intrest Rates: Public Provident Fund (PPF) is a savings-cum-tax-saving instrument in India, introduced in 1968 by the National Savings Institute of the Ministry of Finance. The scheme aims to raise small savings by offering investment with reasonable returns. Income tax benefit. The scheme is fully guaranteed by the central government. The balance in the PPF account is not subject to attachment under any order or decree of the court. However, income tax and other government authorities can attach an account to recover tax arrears.
The PPF account or public provident fund scheme is one of the most popular long-term savings-cum-investment products, mainly because of its combination of security, returns, and tax savings.
PPF was first introduced to the public in 1968 by the National Savings Institute of the Ministry of Finance. Since then it has emerged as a powerful tool for investors to create long term wealth.
Investors use PPF as a tool to invest more money regularly for their retirement (PPF has a maturity of 15 years, and the ability to extend tenure). With its attractive interest rates and tax benefits, PPF is a big favorite with a small saver.
Features of the PPF accounts
- You can invest a minimum of Rs. 500 and a maximum of Rs. 1,50,000 in a financial year.
- The minimum tenure of a PPF is 15 years. If you want, you can increase it in a block of 5 years.
- Any Indian citizen can open a PPF account.
- You can take a loan in your PPF account between the 3rd and 5th year and make a partial withdrawal only after the 7th year for emergencies.
- You only get Rs. Can open PPF account from With any recognized 100 you can deposit every month or lump sum through cash, check, DD or online transfer.
- The PPF account cannot be held jointly, although you can make a nomination.
- You must compulsorily make a minimum deposit of Rs. 500 every year.
- The PPF account can be transferred from any branch of the nationalized bank to the post office and vice versa. The account cannot be transferred from one person to another. Further, if there are no customers, the nominees cannot choose to continue the account in their own name.
- The PPF scheme provides account holders the benefit of availing loans on their accounts. Customers can apply for a loan for the third to a sixth financial year after opening an account. Loan can be availed on account of 25% amount. If the loan is taken on behalf of the minor, the guardian must make a declaration that the money will be used for the benefit of the minor.
- The PPF scheme allows subscribers to enjoy tax rebate at the time of deposit, payment of interest and withdrawal.
- A PPF account currently earns 8.0% interest notified by the government. It will continue to earn interest even if you want to continue the account even after the first 15 years without any further investment. This interest is completely tax-free in your hands.
- Initial contribution for opening PPF account is as low as Rs. 100/-.
- PPF account is transferable.
- You get a tax exemption under 80C for your investment amount.
- It is entirely a safe government-backed investment; There is no risk involved.
- Nomination facility is allowed except for minor accounts.
Eligibility criteria to open PPF account:
- Any person can open PPF account except NRI and HUF.
- “One person-one PPF account”, you can open only one account in your name.
- A PPF account can be opened for minors by their parents or guardian (tax exemption benefit is still available subject to the maximum limit).
- If you have a GPF or EPF account, you are still allowed to open a PPF account in your name.
What is the maturity and withdrawal option available in PPF account?
- The maturity of the account is about 15 years and on maturity you can have the following three options: OR
- Withdraw your accumulated funds in PPF account and close it;
- You can extend your PPF account for 5 years without any further contribution: OR
- You can extend it for 5 years with regular contributions.
Loan against PPF Account
- You can get a loan from your PPF account between the third and sixth fiscal years of account opening.
- No loan can be availed from the seventh year of opening the account as you become eligible for partial withdrawal.
- The loan amount is repayable in a lump sum or in two or more monthly installments over a period of 36 months.
- After repaying the principal amount, interest on the loan taken from the PPF account is not payable in two monthly installments.
- The interest on the loan is charged 2% more than the interest earned on the amount deposited in the PPF account. For example, if the interest earned on a PPF account is 8%, the interest charged on the loan will be 10%.
PPF Interest Rates for the Past 10 Years
In the table below, you can find the history of PPF interest rates from April 2008. As you will note, in 2018 the PPF interest rate has fallen from a low of 8.8% to a low of 7.6%. However, for PPF interest rates are 7.1% in the April – June 2020 quarter.
|Time Period||Interest Rate (p.a.)|
|From 1 April 2020 to 30 June 2020||7.1%|
|1 October 2019 to 31 March 2020||7.9%|
|From 1 July 2019 to 30 September 2019||7.9%|
|From 1 April 2019 to 30 June 2019||8.0%|
|From 1 January 2019 to 31 March 2019||8.0%|
|From 1 October 2018 to 31 December 2018||8.0%|
|From 1 January 2018 to 30 September 2018||7.6%|
|From 1 July 2017 to 31 December 2017||7.8%|
|From 1 April 2017 to 30 June 2017||7.9%|
|From 1 October 2016 to 31 March 2017||8.0%|
|From 1 April 2016 to 30 September 2016||8.1%|
|From 1 April 2013 to 31 March 2016||8.7%|
|From 1 April 2013 to 31 March 2015||8.7%|
Data Source: National Savings Institute
Premature closure of PPF Account
Public Provident Fund Scheme, 2016 amended the PPF Scheme, 1968 and closed the PPF account prematurely. You can choose to prematurely close your PPF account for medical treatment of a family member and after completing 5 years for your higher education.
In case of premature closure, you will have to pay 1% of your balance to the bank as a penalty.
PPF tax exemption limit
Your PPF account comes under the rebate, rebate and rebate tax basket. Your annual contribution is eligible for tax deduction under Section 80C of Income Tax.
Contributions by your spouse and children to your PPF account are also eligible for PPF tax benefit. The tax concession is capped at Rs. 150,000 of your total income in a financial year.
Maturity is earned on PPF account and tax is also exempted on maturity income.
How to open PPF account?
You can open PPF account in the post office or with nationalized banks or authorized private banks.
The minimum amount required to maintain a PPF account is Rs. 500 per year.
You can pay a maximum of Rs. 150,000 Lakhs in your PPF account. Any amount deposited in excess of Rs. 150,000 lakh will not earn any interest in a financial year. You can deposit the amount in a lump sum or in a maximum of 12 installments in a year.
The entire amount of PPF can be withdrawn at maturity after 15 years.
Interest earned on PPF account is tax-deductible and the principal amount is subject to tax deduction under Section 80C of the Income Tax Act. The interest rate on PPF is compounded annually.
How to Transfer a PPF Account?
You can request to transfer your PPF account from one branch to another branch or post office for free. The steps are as follows
- You can contact the bank where the account is created and fill in the transfer form.
- The existing bank will forward the form, account opening the application, nomination form, sample signature and check / DD for the balance in the account at the new bank or branch you specify.
- Once the new branch receives the document, they may ask you to submit a new application form along with your old passbook. You can also name a new nominee. You are also advised to submit KYC documents.
- After a few weeks, you can check the status online. If it is not updated under PPF account, you should inquire with the local branch.