Public Provident Fund (PPF) stands tall among myriad investment avenues like shares, mutual funds, and bonds. With its consistent returns and government-backed security, PPF has become a go-to option for investors seeking long-term, secure investment.
In my opinion, amongst all above ways of investment Public Provident Fund is the best, safe and secured investment. Public Provident Fund is known as PPF. Provident Fund is regularly deduct every month from salary of an employee and when he retired from the job will get this amount credited to his account. National Pension Scheme is particularly for salaried person. So far as investment in shares, no one is sure and there is no guaranty for return of investments, there for Public Provident Fund is the best source of income for other persons.
Public Provident Fund is popular investment scheme among investors courtesy of its multiple investor-friendly features and associated benefits. Investment in Public Provident Fund can be simply stated as a long term investment scheme, popular among individuals, who want to earn high but stable returns. Every individual who invest in Public Provident Fund, knows that their principal amount is very much safe, and that is their prime target, of opening PPF account.
Public Provident Fund Scheme, 1968:
Public Provident Fund Scheme was introduced in the year 1968. When a PPF Scheme is introduced, the PPF account is scheduled for the applicant where the money is deposited every month and interest is compounded. At that time along with an individual Hindu Undivided Family can also open account in PPF Scheme and make investment. Contribution to PPF account is exempt u/s 80C along with other investment, to the limit of Rs. 1,50,000.
Vide Notification No. 1559(E). dt. 09.11.2005 279 ITR (St.)7 in an account standing in the name of, in the case of an individual, the individual, the wife or husband and any child of the such individual. Contribution by an individual in an account standing in the name of spouse (i.e. husband/wife) is eligible for deduction under section 80C and in the case of an Hindu Undivided Family, any member thereof is eligible for deduction under section 80C of the Income Tax Act, 1961.
It’s worth noting that, as of now, PPF accounts cannot be initiated under the name of an HUF. When the scheme was originally established, HUFs had the privilege to open PPF accounts. However, this provision was revised and restrictions were implemented starting from 13th May, 2005.
Who can open PPF account?
Eligibility criteria for opening PPF account. It may open in any schedule bank or Post Office.
- PPF accounts are exclusive to Indian citizens living within the country’s borders.
- While eligible individuals can establish one PPF account in their name, opening a second account, even if all criteria are met, is not permissible.
Minors can open PPF account
Minors can also open PPF account under the following conditions:
- Only one of the parents or guardians can open the accounts of behalf of them.
- The person operating minor’s account should be their legal guardian.
- While opening their accounts, registration of a nominee is mandatory.
- Total PPF investments in a minor’s account cannot be more than Rs. 150,000 for a particular financial year. The minimum amount to contribute to the account is Rs.500.
- Grandparents cannot open PPF accounts for their grandchildren.
In addition to this, the parents of the minors should provide their details in the account opening form and carry their KYC documents along with a photograph for verification.
Non Resident Indians :
Further, non-resident Indians cannot open their new PPF accounts as per the Indian Ministry of Finance’s announcement in August 2018. However, there are certain factors to be considered here.
- Any resident Indian who has become NRI can continue with their existing account until the completion of tenure of 15 years. That means they cannot extend it for 5 years as Indian Citizen can.
Documents required to open PPF account:
Document verification is a vital part of PPF eligibility. One needs to present the following documents during the application procedure:
- Form A or the PPF account opening form ( obtained from the authorized bank)
- KYC documents like Adhar Card, Voter ID or Driver’s License;
- Address proof
- PAN card
- Passport size photograph of the applicant
- Form E or nomination form(Obtained from the authorized to open a PPF account)
Tax Benefit:
Income tax exemptions are applicable on the principal amount of invested in PPF as on account. The entire value of investment can be claimed for tax waiver under section 80C of the Income Tax Act, 1961. However, it should be kept in mind that total principal that can be invested in one financial year cannot exceed Rs. 150,000.
The total interest accrued on PPF investment is also exempt from any tax calculations.
Therefore, the entire amount redeemed from PPF account upon completion of maturity is not subject to taxation.
This investment is known as triple EEE:
| Investment | Exempt |
| Interest | Exempt |
| Maturity | Exempt |
Withdrawals:
There are multiple clauses that an individual must adhere to in case he/she wants to withdraw funds from PPF account.
Mandatory lock-in of 15 years is imposed on the principal amount invested in such plans. In case of emergencies related to specific end-uses, partial withdrawal can be made. However, the amount can only be extracted after the completion of 5 years of activation of the account. Up to 50% of the total balance can be withdrawn in one transection each financial year succeeding 4th year.
Investors should note that funds invested in a PPF account cannot be liquidated before the completion of the maturity period.
Loan against PPF Scheme:
- Between third and fifth years of your PPF account, you can take out a loan.
- The loan amount can be no more than 25% of the second year immediately preceding the loan application year.
- If the first loan is entirely repaid, a second loan can be take out before the sixth year.
Conclusion
PPF remains one of the most attractive and reliable investment options in India. Its blend of tax benefits, decent returns, and capital safety makes it an indispensable part of a diversified investment portfolio. Whether for retirement planning or long-term wealth accumulation, PPF promises consistency and security.
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