Public provident fund (PPF) is one of the investment options for individuals looking to save tax while saving for their better future. PPF is basically a government-sponsored investment scheme made available to the general public through banks and post offices in India.
What is a PPF account?
Public Provident Fund (PPF) scheme is a long-term investment option backed by the Government of India. It offers a safe investment avenue with a government-controlled interest rate. Individuals can invest Rs 500-Rs. 1,50,000 in one financial year. PPF has a lock-in period of 15 years, which can be extended by the investor. The entire amount invested as well as the interest earned in PPF is eligible for tax deductions. All PPF accounts must have a minimum deposit of Rs 500 every financial year.
The Public Provident Fund (PPF) Scheme is a tax-free savings scheme introduced by the Government of India in 1968. Interest earned on PPF deposits are tax-free. Deposits made in PPF accounts are eligible for tax deductions. It is one of the most tax-efficient investment schemes in India. The objective of the PPF scheme is to encourage savings and to help them create a retirement corpus.
One of the main advantages of PPF accounts is that the funds can’t be attached under court order or laid claim to by creditors.
How to Open a PPF Account?
PPF accounts can be opened at any nationalised bank, select private banks and through Indian post offices. The process for opening a PPF account is same as a bank account. Just fill a simple form, provide the relevant identity & address documents and deposit the minimum pay-in (Rs 500) with the bank or post office you want your PPF account to be maintained.
If you already have a savings account with a bank or post office that offers PPF deposit scheme, you can open a PPF account with just a basic form. Many banks provide the facility to open new PPF accounts online, making it even easier to get started.
Eligibility for PPF Account
- Any individual above 18 years can open a PPF account
- Parents can open PPF account for minors
- One can have only one PPF account
- Only Indian citizens can open PPF accounts
- Only individuals are allowed to have a PPF account
- Hindi Undivided Families (HUFs) not allowed to have a PPF account
PPF Interest Rate
The interest rate for PPF accounts is decided and announced by the government each year. For financial year 2016-17, the annual interest rate is fixed at 8.1%. In the preceding financial year 2015-16, the interest rate for 8.7%.
PPF Lock-in Period
PPF accounts have a lock-in period of 15 years. So, once you open an account, all deposits remain locked in for 15 years from the date of opening the PPF account. However, you are allowed to take loans against PPF accounts from third to sixth year of opening the account and make partial withdrawals from seventh year of opening the account.