Public Provident Fund
Public Provident Fund(PPF) scheme was launched in 1968 by the Finance Ministry’s National Savings Institute.
An individual can voluntarily open a PPF account with any nationalized bank, selected authorized private bank or post office.
The account can be opened in the name of individuals including minor,in case of minor there must be a guardian for that PPF accounts,parents can act as guardians in such PPF accounts of minor children.
The main objective of PPF scheme is to help individuals to make small savings .
Annual contributions qualify for tax deduction under Section 80C of income tax. The tax benefit is capped at ₹1.5 lacs per financial year. Contributions to PPF accounts of the spouse and children are also eligible for tax deduction.
In PPF scheme,The interest rate compounded annually and paid on 31 March every year and no tax is required to be paid on the interest earned and this makes PPF a best saving scheme.
Loan facility available from 3rd financial year up to 6th financial year.once you become eligible for withdrawals, no loans would be permitted.
Inactive accounts or discontinued accounts are not eligible for loan.
PPF Payments towards the account can be made in the form of PF transferonline, Demand Draft, cheque, or cash.
Eligibility
Any individual who is resident of India is eligible to open their PPF account.
An individual can open only one PPF account under his/her name. Under the PPF scheme, joint accounts cannot be opened.
Document required-
1-ID proof any of the following Aadhaar card,Voter Id, Driving license,passport etc.
2-Permanent Account Number (PAN) card.
3-Address proof with the current address mentioned.
Investment and returns
A minimum yearly deposit of ₹500 is required to open and maintain a PPF account.
A PPF account holder can deposit a maximum of ₹1.5 lacs in his/her PPF account (including those accounts where he is the guardian) per financial year.
Any amount deposited in excess of ₹1.5 lacs in a financial year won't earn any interest.
In PPF account, the amount can be deposited in lump sum or in a maximum of 12 installments per year. However, this does not mean that account holder can deposit single deposit once in a month.
Duration of scheme
PPF duration is 15 years. Thereafter, on application by the subscriber, it can be extended for 1 or more blocks of 5 years each.
15 years which is default PPF duration is the lock period of PPF and subscriber can withdraw the PPF amount after its maturity period.
However, pre-mature withdrawals can be made from the start of the seventh financial year.
The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of 4th year preceding year or the end of immediately preceding year whichever is lower.
After 15 years of maturity, full PPF amount can be withdrawn and all is tax free, including the interest amount as well.
On maturity, applicant has 3 options once the maturity period is over.
1-Complete withdrawal.
2-Extend the PPF account with no contribution –PPF account can be extended after the completion of 15 years, subscriber doesn't need to put any amount after the maturity. This is the default option meaning if subscriber doesn't take any action within one year of his PPF account maturity this option activates automatically. Any amount can be withdrawn from the PPF account if the option of extension with no contribution is chosen. Only restriction is only one withdrawal is permitted in a financial year. Rest of the amount keeps earning interest.
3-Extend the PPF account with contribution - With this option subscriber can put money in his PPF account after extension. If subscriber wants to choose this option then he needs to submit Form H in the bank where he is having a PPF account within one year from the date of maturity (before the completion of 16 yrs in PPF). With this option subscriber can only withdraw maximum 60% of his PPF amount (amount which was there in the PPF account at the beginning of the extended period) within the entire 5 yrs block. Every year only a single withdrawal is permitted.
Transfer of PPF account
The account can be transferred to other branches/ other banks or Post Offices and vice versa upon request by the subscriber. The service is free of charges.
Approach the bank or post office branch where the PPF account is held and ask for the form for making the transfer. The bank or post office will provide you with a form which is to be filled.