PPF is Central Government Tax Saving Scheme with long term investment and tax saving option. In this article, we will cover the following areas-What is PPF and where you can open such account, Interest rate applicable on PPF, Who can open a PPF Account,  Minimum and maximum investment required in PPF Account, Lock in period of PPF, tax benefits for investing in PPF and withdrawal options available before maturity.

1. What is PPF and where you can open such account?

PPF means Public Provident Fund. It is a long term investment and tax saving options. One can open a PPF a/c in any bank or post office in India. Every bank and post office offers same rate of interest on PPF a/c since it is a central government scheme.

2. What is Interest rate applicable on PPF Account?

Interest rate on PPF a/c is linked to 10 year government bond yield. Such rates are updated quarterly and interest amount will be credited to your PPF a/c at the end of the year.

*To earn more interest on PPF a/c, one should make investment before 5th day of the month because balance of 5th day is used to calculate interest for the month.

3. Who can open a PPF Account?

Every Indian citizen can open a PPF a/c. There is no age limit for opening such a/c. You can open a Minor a/c for your child or a senior citizen a/c for your parents. Only check is that, an Indian citizen can have only one PPF a/c.

NRI/HUF cannot open PPF A/c.

4. What is minimum and maximum investment required in PPF Account?

Every year a minimum investment of Rs. 500 is required to be made in PPF a/c. A person can make maximum investment of Rs. 1,50,000 per year. Any contribution above Rs. 1,50,000 will not be eligible for earning interest.
The above deposit in PPF a/c can be made in one installment or as many installments you want.

If minimum investment of Rs. 500 is not deposited in PPF a/c then penalty of Rs. 50 is levied.

5. What is lock in period of PPF a/c?

Deposits made in PPF a/c gets locked in for next 15 years. However, withdrawal options in this block of 15 years are available.

6. What are tax benefits for investing in PPF a/c?

Deposits made in PPF a/c are EEE category of tax saving. Means Deposits made in PPF a/c, interest earned on PPF a/c and maturity we gets – all three incidences are tax free.

7. What are withdrawal options available before maturity?

We have 3 options for withdrawals

a. Loan on PPF

One become eligible for Loan on PPF after completion of 3 years since account opening. One can get loan in between of 3rd – 6th year of account opening.
Loan amount = 25%*Balance of last 2 years.
Loan need to be repaid in 36 months.

b. Partial Withdrawal

After completion of 5 years of account opening, one can opt for partial withdrawal from PPF a/c.

Loan amount = 50%*Total balance after 5 years.

*The time period of 5 years starts after completion of one year. Means one can apply for partial withdrawal after 6 years of completion.

c. Premature Close

Under this option, one can opt to close such account. But only under following conditions –

a. Your PPF a/c is 5 year old.

b. You want this corpus for treatment of serious illness, marriage or higher education of your self or your children.

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April 2021