Public Provident Fund (PPF)

PPF stands for Public Provident Fund – a government backed, long term, retirement saving instrument. With a 15 year lock in, this is the longest horizon for an investment that exists in India. If you are keen on a safe investment, a decent rate of return, tax benefits deduction and tax free interest) and have a long term investment horizon, then the PPF is for you. It is a disciplined investment avenue as your money is blocked for 15 years.

PPF also offers loan against the account which can help you during occasions like a wedding in the family, further studies of your children, etc. The minimum deposit amount is Rs. 500 per annum and the upper ceiling limit is Rs. 1,00,000 per annum. The current rate of interest on Public Provident Fund (PPF) is 8.7%, which is compounded annually. A Public Provident Fund (PPF) account gets matured after the completion of 15 years from the end of the year in which the account was opened. A customer can extend the tenure of a Public Provident Fund (PPF) investment for a block period of 5 years beyond the maturity period by submitting Form H within one year from the date of maturity.

No premature withdrawal is allowed for Public Provident Fund (PPF) accounts. Only in the case of the death of a customer, their nominee/legal heir can close the account by submitting the required documents as guided by the Ministry of Finance. Customer can make one withdrawal every year, from the 7th financial year, of an amount that does not exceed 50% of the balance of the customer credit at the end of the fourth year immediately preceding the year of withdrawal or the amount at the end of the preceding year, whichever is lower. Customers can avail of the loan facility between third financial year to sixth financial year ie. from third financial year upto end of fifth financial year.

What is the eligibility for investing under Public Provident Fund (PPF) Scheme, 1968?

• A Public Provident Fund (PPF) account can be opened by resident Indian Individuals and individuals on behalf of minors.
• Only one Public Provident Fund (PPF) account can be maintained by an Individual, except an account that is opened on behalf of a minor.
• A Public Provident Fund (PPF) account can be opened either by the Mother or Father on behalf of their minor Son or Daughter; however the Mother and Father both cannot open Public Provident Fund (PPF) accounts on behalf of the same minor.
• Grand-parents cannot open a Public Provident Fund (PPF) account on behalf of minor grand-child; however, in case of death of both the Father and Mother, Grand-parents can open a Public Provident Fund (PPF) account as guardians of the Grand-child.

5 things one must know about PPF Account

1. If somebody has the PPF account which is forgotten or ignored, one can revive this PPF account with paying the pending subscription and penalties.
2. One needs to deposit minimum of Rs. 500 per year to make the account active. If somebody fails to deposit the minimum amount, a penalty of Rs. 50 per year will be charged on the account. In case of reactivation, one need to pay due amount as well as penalty till the date of reactivation.
3. Once PPF account is declared inactive, the account holder needs to visit in the bank for make it active for verification process.
4. If your PPF account has already matured, it will not earn any interest from the date of maturity. You cannot reactivate such an account, but will have to pay the penalty to claim the proceeds.
5. If the PPF account is close to maturity, you can apply for an extension, with or without further contribution, for a period of five years from the date of maturity to be able to earn an interest on the accumulated amount.