CA Sandeep Kanoi

CA Sandeep KanoiThe Public Provident Fund is the darling of all tax saving investments.  You invest in it and you get a deduction on your income. Besides, the interest you earn on it is tax-free. Since it is a scheme run by the Government of India, it is also totally safe.

PPF refers to Public Provident Fund and is a Long Term Debt Scheme of the Govt. of India on which regular interest is paid. Any Individual (whether Salaried or Self-Employed or any other category) can invest in this scheme and can earn a handsome tax-free return on the same which is usually higher than the return offered by Banks on Fixed Deposits.

1. Where You  can open a PPF Account and How?

a . To open a PPF account, drop  by a State Bank of India branch. SBI’s subsidiary banks can also open accounts. A list of these subsidiary banks is available on the bank’s Web site.You can even visit the nationalised bank in your neighborhood. Selected branches of nationalised banks can also open accounts.The head post office or selection grade sub-post offices also open PPF accounts.

b. You will have to fill up a form. You can take a look or download the form from SBI’s web site. Along with the form, attach a photograph and submit your Permanent Account Number. If you do not have a PAN, then furnish an attested copy of either your ration card, voter’s identity card or passport. When you open an account, you will be given a passbook (just like a bank pass book) in which all subscriptions, interest accrued, withdrawals and loans are recorded.


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2.  Who can and who cannot not open PPF Account?

a. Who Can Open PPF Account – Any Individual (whether Salaried or Self-Employed or any other category) can invest in this scheme. HUFs are no more allowed to open any PPF account

b. Who Can Not open PPF Account- NRI’s are not allowed to subscribe to PPF Account. However, if someone opens a PPF Account while he is a Resident of India but subsequently becomes a NRI, he shall be allowed to continue investing in his account.  An NRI can  invest up to Rs 1,00,000 per financial year in an existing account, that is, an account that he opened prior to becoming an NRI. If someone  inadvertently opened an account after becoming an NRI, it is best to close it before it comes to the attention of the concerned authorities in India.

3. You can have only one PPF account in your name. If, at any point, it is detected that you have two accounts, the second account you have opened will be closed, and you will be refunded only the principal amount, not the interest.

4. You cannot open a joint account with another individual. The account can only be opened in one person’s name. You are free to nominate one or more individuals. On the death of the account holder, nominees cannot keep the account going by making contributions. If there are no nominees, the legal heirs get the money. You can open one account for yourself and others for your child/ children. But, on your death, your children cannot make any additional contributions.

5.   Minimum and maximum deposit limit

A minimum deposit of Rs. 500 must be made during one whole financial year. The maximum that could be deposited is Rs. 1,50,000 in a financial year.  The interest you will earn is currently wef 01.04.2014 is 8.70% per annum (compounded yearly).  Deposits could be in either one go, or in flexible installments (in multiples of Rs. 10). You could vary the amount and the number of installments, as per your convenience, provided you do not exceed 12 installments in one financial year. Failing to deposit the minimum requirement, would lead to your account being discontinued. Interest would however continue to accrue. You could regularize the account again on paying the prescribed default fee along with subscription arrears.

6.  Continuing PPF after the 15 year period-  The PPF account is valid for 15 years. The entire balance can be withdrawn on maturity, that is, after 15 years of the close of the financial year in which you opened the account.  Once your account expires, you can open a new one. The only limitation is that you cannot withdraw it until seven years are completed, after which 50% of your deposits can be withdrawn, if needed.

PPF account holders have an option of extending their accounts after the 15 year tenure with or without further subscription, for any period in a block of 5 years. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed. In case the account is extended without contribution, any amount can be withdrawn without restrictions. However, only one withdrawal is allowed per year.

If you continue the account after 15 years, with continued deposit, withdrawal up to 60 per cent of the balance at the beginning of each extended period (block of five years) is permitted.

7. Deposit date in Cheque payments :- In case of PPF account money deposited  by means of a cheque or demand draft, the date of encashment / Realisation  of the cheque or demand draft will be treated as the date of deposit. This issue becomes particularly relevant in respect of deposits made towards the end of the financial year by cheque / demand draft because if the same is not realised by March 31, then the same will be treated as deposits for the following financial year. This would also have ramifications in respect of the tax deduction being claimed by the individuals in a particular tax year.

8. Opening an account for a minor :- U
nder PPF scheme, an individual may on his own behalf or on behalf of a minor of whom he is a guardian, open a PPF account. Further, either father or mother can open PPF account on behalf of his / her minor child, but both cannot open the account for same child.

9. Loans on PPF Account

Loans can be availed from the 3rd financial year excluding the year of deposit. Amount of such loans must not exceed 25 percent of the amount that stood to the account holder’s credit at the end of the second year immediately preceding the year in which the loan is applied for.

A fresh loan is not allowed when a previous loan or interest is outstanding. Interest is charged at a rate of 1% if repaid within 36 months and at 6% on the outstanding loan after 36 months. The repayment may be made either in lump-sum or in Installments.

10. Benefit of Investing in PPF – Taxation of PPF

a. Benefit u/s 80C – The Investments made in PPF Account are eligible for deduction u/s 80C

b. Tax Free Interest – No Tax is payable on the Interest Earned on PPF Account.

11. Premature withdrawal from PPF

The entire amount in your account could be withdrawn only on maturity. However, in times of financial crises partial withdrawals are permitted subject to certain ceiling limits. You could withdraw once a year, from the 7th year onwards. Such withdrawals, must not exceed, 50% of the balance at the end of the fourth year, or 50% of the balance at the end of the immediate preceding year, whichever is lower.

Pre-mature closure of a PPF account is permissible only in case of death.

12. The Interest Rate of PPF is decided by the Govt. The Current Interest Rate on PPF is 8%. The Interest is computed for a calendar month on the basis of the lowest balance in an account between the close of the 5th day and the end of the month and the Interest is credited to the account of the account holder at the end of the year.

13. From which account can an NRI invest in the PPF account?

An NRI can use funds in the NRE account or the NRO account to make investments in the PPF account. It is important to remember that the PPF rules require you to invest at least Rs 500 per financial year in the PPF account. If you fail to make the minimum investment in a year or years your account will be considered dormant. Subsequently, when you want to revive the account, you would need to invest Rs 500 for each year that you missed plus pay up a penalty of Rs 50.

14. What happens on maturity of PPF Account of NRI?

If you are an NRI at the time the deposit matures, you would need to withdraw the balance. An NRI is not eligible for extension on the PPF account. What happens if you leave the account unattended past the maturity date? “In such cases the account will be considered ‘extended without contribution’ in blocks of 5 years for an unlimited period of time. Extended without contribution means that the NRI will not have to make the minimum yearly investment of Rs 500. His account will continue to earn interest at the prevailing rate. According to the PPF deposit rules the extension can be made for an unlimited period of time.

15. What are the differences and similarities between the National Savings Certificate (NSC) and PPF?

National Savings Certificate (NSC)Public Provident Fund (PPF)
Interest Rate:  5 Year NSC – 8.50 %, compounded half-yearly on amount invested after 01.04.201410 Year NSC – 8.80 %, compounded half-yearly  on amount invested after 01.04.2014Interest Paid: 8.70%, compounded annually
No monthly/yearly paymentsNo monthly/yearly payments
Minimum investment: Rs 100Maximum investment: No LimitMinimum investment: Rs 500 (required annually)Maximum investment: Rs 1,50,000
Duration of investment: 5 years for NSC VIII Issue & 10 Years for NSC IX IssueDuration of investment: 15 years
Can be used as a security for mortgage and other purposesCannot be used for such purposes
Tax benefit under Section 80 ‘C’ available.Maximum limit: Rs 150,000Tax benefit under Section 80 ‘C’ available.Maximum limit: Rs 1,50,000
Good medium-term investment optionGood long-term investment option
Interest is fully TaxableInterest is fully Exempt

Do consider opening a PPF account if you do not have one. You can put in as little as Rs 500 a year to keep it going.

16. Only the person actually depositing the amount gets section 80C benefit

This means if your spouse deposits any amount into your PPF account, you will not be able to claim the deduction benefits under section 80C. Infact, your spouse will be able to (rightfully) claim section 80C deductions on his/her income.

17. You cannot claim section 80C deductions for any amount deposited by you into your parents’ or siblings’ accounts

While tax laws allow you to claim 80C tax benefits for deposits into your spouses account, the same rule does not apply to your parents, siblings or relatives.

(Republished with amendments)

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Category : Income Tax (20858)
Type : Articles (10788)
Tags : CA Sandeep Kanoi (235) nsc (22) PPF (68) public provident fund (38) Section 80C (119)
  • Rakesh_gamdi

    good information

  • Chandan Rastogi

    I have a doubt. Suppose if I invest 100000 Rs. in a year so whether that 1 lakh rupee is 100% tax free or not?

    • Pranay

      Yes it is tax Free

  • Brijmohan Sharma

    Dear Sir,
    I have invested Rs 40000 in financial year 2015-16 in my ppf account. In the month April 2015 an entry showing interest Rs 16000 earned in 2014-15 in my ppf pass book.Which deduction am I be entitled for whether Rs 40000 or Rs 40000+16000?Please guide me. Thanks

    • Dinesh

      only 40,000/- which you invested will be considered.
      interest 16,000/- is not taxable.

  • R.C. Joshi

    Whether a Tax Payer can open a PPF A/c for Mother & claim deduction upto Rs.1.5lacs

  • Hardik Shah

    i open my ppf accounts 1.6.2001 and it maturity date 30.5.2016 so, in the last year i can make deposits 1.50 lac dt. 30.4.2016 and maturity taken in 30.5.2016 , this deduction available.

  • Megha

    Ok.. So now if I have to pay a tax of Rs 4000. In order to get an exemption, what is the amount do I have to save in PPF. Is it 10 times of Tax amount i.e., 4000 x 10 = 40,000 OR 5 times i.e., 4000 x 5 = 20,000 ? Im very confused, Kindly guide me.

    • aryan


    • TaxManSays

      If you’ve already exhausted your 80c limit, this investment might not be of any help.
      However, if you’ve not available 80c yet or have some room then the key question is, are you paying Rs 4000 per month or per year. If per month then you may need to invest about Rs 48000 per year into PPF otherwise an investment of 4000.

      I think more details on your current tax slab might be helpful.

      Hope this helps

      • Megha

        It’s 4000 per year. And my gross is 3.60 Lakhs. I have still a gap of 80k in my 80c and would like to save this 4000 which has been already deducted from my salary. So now i would like to save 40k and thinking to file for a refund of 4000. As a beginner with little knowledge in all this, i would request some expert suggestion is this aspect.


  • Jaisingh

    PPF account is on the name of dependent contribution is totaly mine in that case can I show the same infavor of mine to get tax rebate??

    • Pranay

      No, a PPF account is to be opened on your own name or Your Child/childrens name only then you are eligible to claim exemption under SEction 80C of Income Tax Act

  • Rsh

    Kindly confirm whether PPF amount after maturity i.e., after 15years will be taxable. As per new Budget 2015 -2016 tds will be applciable on EPF at maturity on 60% amount. Will that be applicable on PPF. Kindly guide.

    • Prathamesh

      No it will not be taxable. Only interest on PF declaration will be taxable.

  • Vipul Kumar

    contribution in ppf a/c can made by income of relevent year or can we make it by our other investments

    • Pranay

      Yes you can deposit amount into your PPF account even from the income earned from some other Investments

  • Sanjeevkumar Kabra

    PPF Account opened in 1996 can be continued or not Please reply

    • Pranay

      PPF account has a period of 15 years once it is completed you can further keep on extending the period for a block of next 5 you can continue your PPF account opened in 1996 if it has been extended further in the year 2012 i.e. after expiry of 15 years.

  • Pankaj Parolia

    My PPF Account is maturing on 31 March 2016, If I invest any amount in March this year, whether this investment will be eligible for Exemption under 80 C or I have to extend my account for being eligible? Please reply as soon as possible so that I may invest accordingly. Thanks in Advance

    • Pranay

      right now your investment for the month of march will be eligible for exemption under 80 C for the assessment year 2016-17 , its up-to you whether you would further like to extend your account or not because unless you extend your account you will not be eligible for exemption in the next financial year.

      • Pankaj Parolia

        Thanks for your suggestions, Does it mean that if I close my PPF account after investing for current financial year. and Withdraw the entire amount by closing my account, then also my current year investment be eligible for assessment year 2016-17. Your reply will be valuable for me, Thanks in advance.

        • Pranay

          Yes you will be eligible for Exemption even if you close your PPF a/c after March 31st 2016.

  • M Vinod Kumar

    I believe that from April2016, the PPF account can be preclosed on a penalty of 1% on Interest, Is this TRUE? This news has come in Times of India.

  • Prathamesh


    If suppose I have opened an PPF account and I want to deposit one time 1,50,000 Rs. in my PPF account then what date or month do I need to deposit amount?
    I prefer both monthly or yearly payment option. Please help me. If yearly then I can deposit 1,50,000 in any month and any day of that financial year? & will it be beneficial for 80C that financial year example 2016-17?

    • Pranay

      hi, you can deposit entire amount of 150000 at the beginning of the financial year to get the interest of 8.70 % compounded annually since the interest is completely tax free or else you can also deposit the amount in not more than 12 installments at any times during the year.

  • Dhiren

    Very good Article for understanding PPF. Thank you Mr. Sandeep Kanoi.. Just 1 suggestion, please also add the point about distinction of PF with PPF.

  • shrawan

    I have two PPF accounts: one in my name and other in my spouse name. My spouse is non-working. I deposit total 3L (1.5L in each) annually. I cliam only 1.5L under 80C in my IT return. I do not show interest earned on my spouse PPF account in my IT return as it is tax free as per my understanding. Please tell me if whole thing is legal?

  • Pranay

    no, a person is allowed to open only one PPF account and that too in his own name, hence your Wife’s PPF account exemption part can not be claimed.

  • Pranay

    It will be independent

  • Pranay

    No u cannot use your PPf a/c investment in such a way, entire amount deposited by u can be claimed as an exemption only by the a/c holder under 80C

  • Pranay

    You can claim entire 100000 Rs

  • Pranay

    Yes but exemption would be limited to only 150000 Rs under Sec 80C of Income tax act.

  • Pranay

    80C of Income Tax Act

  • Pranay

    Yes You can get full deduction under 80C of RS 150000

  • Pranay

    You can get No benefit, because you have already deposited Rs 150000 which is the Max. Qualifying amount of Exemption under 80C of Income Tax Act.

  • Pranay

    You can claim only the amount you have deposited into your PPF account, hence the interest on your deposits will not be allowed as exempted.

  • Pranay

    1. No you can open a PPF account only on your own name or your Childrens Name and not on wifes name.
    2. yes you can
    3. no, The Interest earned on a PPF account is Completely Tax Free
    4. after a period of 15 years your PPF account will be Matured and you will be eligible to Extend the period to a further 5 Years Block or close your account and withdraw the amount along with Interest.

  • Pranay

    Total amount will be received by your nominees on your Death.
    Thank you

  • Pranay

    NRI’s are not allowed to subscribe to PPF account. However if someone opens a PPF account while he is a resident of INdia but subsequently becomes NRI he shall be allowed to continue investing in his account , An NRI can invest up to 100000 Rs per Financial year in an existing account that is an account that he opened prior to becoming an NRI. If someone inadvertently opened an account after becoming an NRI , It is best to close it before it comes to the attention of the concerned authorities in INdia

  • Pranay

    You can take exemption under 80C of Income Tax only on the PPF account opened on either Your name or on your Child/Children’s name but the Max Qualifying amount is restricted to RS 150000 per year.

  • Pranay

    NO ,the Max Qualifying amount as per 80C Income Tax act is only Rs 150000.

  • ksunshine

    Hi I already have housing loan that exhausts my 80C exemption. Can I still invest in ppf (upto 1.5L) to get tax free interest or will my interest be taxed or am I not allowed to invest in ppf at all? I understand that I cannot have use this amount under 80C exemption.

  • Piyush Dwivedi

    Is it true that HUF cannot PPF any more? If thats the case, can HUF claim 1.5lac 80c exemption on PPF of karta?

  • R.N.sarkar

    My age at present now I can open the ppf account


    can huf deposit in his members account and claim under 80C

    • Prateek Agarwal


  • Mallikarjun

    Is Premature withdrawal of PPF amount after 7 yrs taxable?

    • Prateek Agarwal

      No, the time period of withdrawal doesnot matter in taxation of PPF amount. It is always tax free.

  • Birendra Choudhary

    Refer your Article:

    Scenario 2

    In the second scenario, the mother has one self-PPF account and opens two other accounts to her two children respectively. Therefore, she manages three PPF accounts. At this stage, she can claim a maximum tax benefit of 1.5 lakh under Sec 80C of the Income Tax Act. Moreover, she will have to invest a maximum of one lakh in all the three accounts.

    my Question is : Why she will have to invest maximum of one lakh in all three accounts when permissible investment is one Lakh fifty thousand per year.

    Question No.2: I have two sons, 4 years and 2 years old respectively. Can my wife open PPF accounts in both’s name. I mean 2 separate minor accounts ? she doesn’t have any PPF account till date in her name.

  • Deepmala Mukherjee

    I have transferred money from my joint saving account (with my mother) to my PPF account and accounts department is saying that i will not get the tax benefit on PPF. Pls suggest.

    • swapan Ray Chaudhuri

      It is immaterial where from you got the credit in your PPF A/c and you should get the benefit of deposit under Sec 80C of Income Tax Act for the relevant year.


    I have an PPF account opened on 31/03/2000. I have deposited my subscription (By cheque) for the year 2015-16 on 25/03/2016. When I visited the bank on 10/04/2016 for PPF pass book entry, they returned the amount and asked me that I have not extended the validity of my PPF account.
    Now what are the options left for me? I want to continue my PPF account.
    Can I continue the same PPF account to get tax free interest till the account is not closed and open a new account for tax saving purposes.
    Please suggest.


    I have an PPF account opened on 31/03/2000. I have deposited the subscription for the year
    2015-16 on 25/03/2016. But when I visited the bank on 10/04/2016 for PPF pass book entry, they returned the amount and asked that I have not extended the tenure of my account.
    Now what are the options left for me? I want a PPF account for tax savings.
    Can I continue the same account to get tax free interest till the account is not closed and open a new PPF account for tax saving purpose.
    Please suggest.

  • manish

    interest received on bank ppf account is tax free, which we can not able to withdraw from the ppf account for 7 years. can the amount of interest is eligible as new investment in ppf and can we able to claim it under 80c deduction?
    for ex. I have received interest of rs.25000 on 31/3/2014, in fy 2013-14, I paid 75000/- new investment in ppf a/c.. then for the fy 13-14, for which amount I am eligible for 80c deduction? 75000/- or for both 75000/-+25000/-=100000/-

    • krishna

      Please allow me to answer . As per IT rules you can claim deductions from your earned income from salary/business etc.However you can consume your withdrawl from PPF and deposit the earned income for claiming deduction.


    I have opened PPF account in the current financial year, can I use this for my TAX deductions for filling IT returns of the 2016-17 Assessment year