Public Provident Fund (PPF)

Public Provident Fund is simply defined as Exempt, Exempt and Exempt (EEE) as it offers exceptional tax benefits to its subscribers under Section 80C. This popular long-term investment scheme was launched by the Government of India offering financial security with reasonable interest rate and returns that are fully exempt from tax.

Under the PPF scheme, the subscriber is assured a guaranteed return every year on the amount deposited by them. Earlier, the interest rate was revised every year. However, now, to keep in line with the market, it is set every quarter offering a chance to yield high returns.

Tip: If you are planning to open a PPF account, ensure to deposit before 5th of every month. The catch here is that the interest on PPF deposits is calculated between the fifth and at the end of the month. Therefore, if you deposit the amount before 5th, you will get the maximum amount of interest on your investment.


How to Open a PPF Account?

A PPF account can be started at any authorized banks. The documents required for a PPF account includes: (a) PPF Form A, available at any bank or Indian Post Offices. (b) Any ID proof: For online applications, necessary documentation and submission of application remain the same. (c) Any address proof, from the following:
  • Aadhaar Card
  • Telephone Bill
  • Ration Card
  • Electricity Bill
(d) Two current passport size photographs. (e) A signed cheque in favour of your PPF account or pay-in-slip at the bank branch. (f) In case of a minor, a birth certificate will also be required as an age proof.

Important Note: All the documents have to be self-attested, and originals must be taken along while opening the account.

Eligibility Criteria to Open a PPF Account

  • Only an Indian citizen can open a PPF account.
  • Every person is allowed to open only one PPF account in their name.
  • PPF account for minors can be opened by submitting legal age proof.
  • Individuals who had opened a PPF account while they were resident of India can continue the account for 15 years with no option for extension.
  • Hindu United Families cannot open PPF account after 13th May 2005. However, all PPF account before this date can be successfully operated until the maturity period of 15 years (no extensions).

What is the interest rate in a PPF?

The interest rate set by the Central Government is mentioned below:

Financial YearInterest rate (Per Annum)
2019-20
April-June (Q1)
July- Dec (Q2 & Q3)

8.0%
7.9%
2018-20198.0%
2017-20187.8%
2016 – 20178.0%
2015 – 20168.7%
2014 – 20158.7%
2013 – 20148.7%
2012 – 20138.8%
2011 – 20128.6%
2010 – 20118.0%
2009 – 20108.0%
2008 – 20098.0%
2007 – 20088.0%
2006 – 20078.0%
2005 – 20068.0%

List of Banks where You can Open a PPF Account

PPF is a government savings scheme offered by banks and post offices. Some banks do not offer PPF accounts. You can find a list of banks which offer PPF accounts below.

A) Private Sector Banks

  • Axis Bank
  • ICICI Bank
  • HDFC Bank

B) Public Sector Banks

  • State Bank of India
  • PNB
  • Canara Bank
  • Indian Bank
  • UCO Bank
  • Bank of India
  • Bank of Baroda
  • Allahabad Bank
  • Central Bank of India
  • Union Bank of India
  • Andhra Bank
  • Corporation Bank
  • Dena Bank
  • Indian Overseas Bank
  • Syndicate Bank
  • UCO Bank
  • United Bank of India
  • Vijaya Bank
  • IDBI Bank

How to Revive an Inactive PPF Account?

Revival of inactive account means reactivation. If your PPF account has been deactivated then in that case you can revive you PPF account by submitting a written application where the account is opened. Alongwith application, you are required to pay a penalty of Rs. 50/- for each year of default, Rs. 500/- for each year as arrear payment.


What is Attachment Immunity?

The amount available in PPF account of any person is not liable for attachment by any court in India. In case you are facing any non compliance on financial commitment like failure of repayment of loan etc, in that case the court may order to freeze your assets but balance available in PPF account cannot be attached by the court. This was a positive move taken by the government to encourage investment in PPF account.


Benefits of a PPF Account

Investments are usually made with the purpose to grow capital on finance or to acquire tax benefits. Mentioned below are some of the benefits a PPF scheme offers:

Small Investment, Good Returns:

PPF account is a real lifesaver when it comes to small investments. It has a minimum limit of Rs 100 per transaction and allows up to 12 transactions per year. You can also add a lump sum amount at any time in a financial year, provided it is in the limits of your account. Also, it gives you a reasonable rate of interest of 8% compounded annually. Also, it gives you a reasonable rate of interest. For the FY 2019-20 the interest rate for Q1 i.e. April to June is 8% and for Q2 & Q3 i.e.(July to December) the interest rate is 7.9%.

Flexible Installments:

With a PPF account you get the flexibility of investment. You can invest with as little as Rs 500 to up to Rs 1,50,000 in a year. Not only in investment, but it also allows you flexibility on maturity. Once the account has matured after 15 years, you can simply withdraw the amount, or you can extend it for a further five years.

Easy Loan Option:

PPF account allows you to take a loan after two years. You can withdraw up to 25% of the previous year’s balance from 3rd year onwards. A secure credit is available from 3rd year to 6th year. Once the loan is taken, it can be repaid within 24 months, and the rate of interest is 2% more than the PPF rate of interest persisting then.

Numerous Tax Benefits:

The best thing about earnings from the PPF account is that it is completely tax-free. All the deposits you make in your PPF account is eligible for tax deductions under Section 80C. So, you can save up to Rs 1,50,000 per year. Not only the interest that is earned yearly but also the total amount on maturity is completely tax-free. So, it’s an overall win-win game.

Risk-free Returns:

If you are looking for risk-free, government-backed investment plans, PPF is your answer. The money you invest is completely secure, and it also fetches you a reasonable rate of interest compounded annually. It has a facility of partial withdrawals and loans. It is one of the most recommended options and trusted by people for many years.


Frequently Asked Questions (FAQs) About PPF

Though opening a PPF Account is easy, there are always some general questions and queries that keep bugging us. And, when it comes to savings and investments, the doubts just add up. Addressing that, we have tried to answer some of the frequently asked questions on public provident fund scheme or PPF account.

Q- How many Public Provident Fund (PPF) accounts can be opened?

Unfortunately, only one PPF account can be opened under an individual’s name. However, you can open and operate a PPF account on behalf of a minor until he/she attains maturity.


Q- Is it mandatory to have a PAN number for opening a PPF account?

Opening a PPF account is like opening any other bank account. You must have a PAN card number. However, if you do not have one or it is still in process, you can declare it in Form No. 60 and get your new PPF account opened!


Q- Is there a provision for opening a joint PPF account?

PPF is an individual account, and it cannot be opened in the name of more than one person.


Q- Can a PPF account be opened in a minor’s name?

Yes, any of the two parents or a legal guardian to the minor can open a PPF account for them. The parents or guardian will be required to submit their documents along with the birth certificate of the minor.


Q- What is the minimum and maximum amount that can be invested under the Public Provident Fund (PPF) Scheme?

You can invest a minimum of 500 rupees to a maximum of 1,50,000 rupees in one financial year on PPF account.


Q- How many deposits can be made in a PPF account in one financial year?

Though you can make more than one deposit in a month, the total number of deposits cannot exceed 12 in a financial year.


Q- Am I eligible to claim the benefits of section 80C, if I contribute to my parents PPF account?

Unfortunately, you cannot claim tax benefits in this case. Though tax laws permit you to claim 80C tax benefits for deposits into your spouse’s account, the same decree does not apply in case of parents, siblings or relatives.


Q- What is the maturity timeline of a Public Provident Fund (PPF) account?

A Public Provident Fund (PPF) account matures post completion of 15 years from the end of the year in which it was opened. Fifteen years is the locking period of any PPF account.


Q- What is the difference between withdrawals and loans against PPF Account?

Withdrawal is a simple drawing of a certain amount from your account that you are not liable to pay back. However, when you are applying for a loan against your PPF account, you are responsible for paying the loan amount along with interest.


Q- To what limit I can take a loan against my PPF Account?

You can apply for a loan up to 25% of your total amount collected by the end of the immediate 2nd preceding year.


Q- Can PPF account be closed or terminated before maturity?

You can get your UAN number from your employer. As all the employers possessess the details related tpo the UAN number of their employees.


Q- Can PPF account be closed or terminated before maturity?

While earlier there was no provision of premature closure or termination of the PPF account except in the case of death, it is now possible under certain circumstances.

According to PPF amendment scheme 2016, closure or termination of a PPF account is possible, if the account holder has completed five financial years, where:

  • The investment is required for the treatment of severe illness or life-threatening diseases of the Account holder’s spouse, dependent children or parents. The account holder will be required to submit supporting documents from a competent medical authority.
  • The investment is needed for higher education. The account holder can close or terminate the account on the submission of documents and fee bills confirming their admission in a recognized university of higher education in India & abroad.

Q- Is it compulsory to withdraw my savings amount at the end of 15-year tenure?

No, it is not binding to withdraw the investment amount on maturity. If you wish to extend the tenure of the PPF account, it can be continued for five years more per extension.
The extensions can last with or without any deposits. However, you will continue to receive interest on the amount even during the extension period.


Q- What happens in case of failure of deposit in one or more Financial Years?

A penalty of Rs. 50 will be charged every year if you fail to deposit the minimum amount of Rs. 500.


Q- What if I wish to transfer my existing PPF account maintained with another bank/post office to the Bank of my choice? Is it possible?

Yes, your PPF account can be transferred to any bank of your choice and it will be considered as a continuing account.


Q- Will my PPF account number change, if I transfer it from a Bank/Post Office to another Bank/Post Office?

Yes, your PPF account number will change if you transfer your account from one bank to another.


Q- In case of an untimely death before the maturity period, what will happen to the savings in my PPF account?

Your legal heirs or nominee can claim the amount of your PPF account.


Q- In the event of the death of a guardian, what happens to the minor’s PPF account?

Well, in such cases, the minor is treated as a benefactor. The amount in the PPF account only becomes payable on the death of the benefactor as per Section 8 of the PPF Act.

However, the account of minor remains functioning and a new account need not be opened. The surviving guardian or a custodian appointed by an expert court may continue the minor’s PPF account after submitting the required guardianship certificate.

So, in conclusion, we can say that investing in a PPF account is a fail-safe option with no risk and guaranteed returns. If you have any other queries regarding PPF, let us know in the comment box, and we will get back to you. Happy savings!!

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.