The Public Provident Fund was started by the National Savings Organization, framed under the PPF Act of 1968 which was initiated by the Central Government to boost and channelize small savings or investments. This Scheme is a government backed, long term savings scheme which offers a decent investment option with consistent returns along with Income Tax benefits under Section 80C. In the intervening 5 decades since its conception, it has continued to hold its pride of place as a favourite savings avenue for all kind of investors. The fact that the Principal and the interest accrued on it are guaranteed and the returns derived is tax-exempted prompts many an investor to keep it on top of their priority list.
With the fixed deposit interest rates being at an all-time low, PPF remains a safe and disciplined alternative for allocating the debt portions of one’s investment portfolio. The facility of opening of opening a PPF Account is available at all designated Post offices across the nation or a nationalised Bank Branch, with the option of transferring from one to another being smooth and hassle-free.
- The PPF Act of 1968 authorises all Indians to be eligible to open a PPF Account, provided they do not have an existing Account under the same scheme.
- A person of any age, even if he is a minor can open a PPF Account. In such a case, either one of his parent may open the Account on his behalf but not his grandparent as long as the parent is alive.
- Even if a person has General Provident Fund or Employee Provident Fund, he can still avail the benefit of PPF Account.
- ‘Non-Resident Indians’ are not eligible to open a PPF Account under this scheme, as per a ruling of 2003. However if one becomes an ‘NRI’ in the course of the 15 years maturity period he may continue to subscribe to the Fund till its maturity on a Non Repatriation basis.
Steps to open a PPF Account
- Head over to your nearest SBI Branch or a branch of any of State Bank’s subsidiaries or select Nationalized Banks or Post Office. The complete list of designated Bank Branches are available with the Bank or on net.
- Fill in the requisite Account Opening Form along with two recent photographs , PAN number and the following documents:
- Identity Proof (PAN Card/ Driving License/ Voter’s I.D Card/ Passport)
- Address Proof (Electricity Bill/ Ration Card/ Telephone Bill)
- Pay-In Slip with the requisite amount to be transferred to the PPF Account and submit it.
- The Original documents must be shown to the Bank Manager, if need be, for authentication purpose.
- All documents must be self-attested.
- Once the processing is done and your identity is validated, you shall receive a PPF Pass Book that shall maintain a record of all transactions done by you in this Account. The passbook is the bona-fide document proof needed for claiming tax deduction under Section 80 C of I.T Act.
Points to Note :
- One can maintain only One PPF Account in one’s name in one’s lifetime.
- A minor can have an account too, opened and maintained by his parent. Only in case of untimely demise of the parent, can the grandparent step in as the legal guardian to be eligible to open a PPF Account in the name if the minor.
- PPF Accounts can never have Joint Account Status.
- It makes more sense to open a PPF Account at a Bank than at a Post office since it provides the facility of online transfer of money from one’s Account to PPF Account as long as the Payee name on both the Accounts matches.
A minimum amount of 500/- and a maximum of 1,50,000/- can be deposited in the course of one financial year either in a lump sum or divided into 12 such instalments.
- Investments made up and above the 1,50,000/- ceiling shall neither accrue any interest nor get Income Tax redemption .The excess amount will be refunded to the subscriber without interest.
- In case an individual maintains two accounts, one in his name and another in the minor’s name, 1,50,000/- is the combined upper limit for both the Accounts.
PPF is a 15 year scheme which can be extended indefinitely in 5 year block segments
Rate of Interest
The rate of interest is determined by the Central Government on a quarterly basis, which at present since January, 2018 is 7.6%.
Best Time to Invest in PPF Account
PPF Accounts are best invested before the 5th of each calendar month since the interest is calculated on the lowest balance at credit in the account between the 5th and the end of the month and the final interest is credited at the end of every financial year.
Loans and Withdrawals
The PPF Scheme extends one the facility of making withdrawals from the third year of opening of the Account.
- 1st loan can be taken in the 3rd year, which is restricted to 25% of the balance including interest, subject to re-payment in maximum 36 instalments.
- 2nd loan may be taken before the end of the 6th financial year, once the 1st loan is fully repaid.
Transfer of Account
The PPF Account can be transferred to another Post office or Bank, at no extra cost.
Premature Closure of Account
At the end of the 5 year tenure of opening the Account, Premature Closure of Account is extended to the individual on specific grounds:
- Treatment of life-threatening diseases or serious ailment of the account holder / his spouse / / dependent children/ dependent parents, on production of medical evidence.
- In case of the higher education needs of the Account holder or the minor under whose name the Account is being operated, on production of fee bills and documents in confirmation of admission in a recognised Institute of Higher Education either in India or abroad.
One may nominate one or more persons as Nominee and the facility of allocating the shares of each is also mentioned in the scheme in a separate Nomination form (Form –E).
The PPF Account and the balance cannot be attached by any Court and hence debtors have no access to it. Income Tax authorities, however are an exception to this rule.
The provision of opening a PPF Account online is also available through the various Bank websites offering PPF Account facility. This is the well-suited Investment option for those who prefer to stay away from the volatility of the market.