Public Provident Fund (PPF)
- raneruchitawe
- Feb 12, 2023
- 3 min read
The Public Provident Fund (PPF) is a long-term savings scheme offered by the Government of India. It was introduced in 1968 with the primary goal of providing citizens with a safe and secure investment option that also offers attractive returns. The PPF scheme is open to all citizens of India, including minors and NRIs, and can be opened at any authorized bank or post office.
Why I should invest in PPF?
One of the key benefits of the PPF scheme is that it offers tax benefits under Section 80C of the Income Tax Act. Contributions made to the PPF account are eligible for tax deductions up to a maximum of Rs. 1.5 lakhs per financial year.
Additionally, the interest earned on the PPF account is tax-free, making it an attractive option for those looking to save for their long-term financial goals.The PPF account has a maturity period of 15 years, which can be extended for a further block of 5 years by making a request before the maturity date. The interest rate on the PPF account is determined by the government and is reviewed on a quarterly basis. The current interest rate is 7.1% per annum, compounded annually.
The minimum amount that can be deposited in a PPF account is Rs. 500 per financial year and the maximum amount is Rs. 1.5 lakh per financial year. Deposits can be made in lump sum or through a maximum of 12 installment payments per year.
How should I start investing in PPF?
1. Obtain a PPF account application form from the bank or post office. The form can also be downloaded from the official website of the Ministry of Finance.
2. Fill in the application form with all the required details, including personal information, contact details, and nominee information.
3. Submit the application form along with the required documents, such as proof of identity, proof of address, and age proof.
4. Deposit the minimum initial deposit of Rs. 500 in the PPF account.
5. You will receive an acknowledgement receipt, which will have the account number and other details.
6. After the account is opened, you can make contributions to the PPF account. The minimum contribution is Rs. 500 per financial year, and the maximum contribution is Rs. 1.5 lakh per financial year. Contributions can be made in lump sum or through a maximum of 12 installment payments per year.
7. Deposits can be made through cash, cheque or electronic transfer.
8. You will receive a passbook, which will have the details of all the transactions made in the PPF account. It should be updated regularly and kept safe.
How I can withdraw from PPF?
The Public Provident Fund (PPF) is a long-term savings scheme, and withdrawals are generally not allowed before the maturity period of 15 years. However, there are certain situations in which premature withdrawal of funds is permitted.
1. After the completion of 5 years: Partial withdrawals of up to 50% of the balance in the PPF account at the end of the 4th financial year or the year preceding the year of withdrawal, whichever is lower, is allowed after the completion of 5 financial years.
2. Medical emergency: If the account holder or their dependent is suffering from a serious illness, the whole or any part of the balance in the PPF account can be withdrawn.
3. Higher education: The whole or any part of the balance can be withdrawn for the higher education of the account holder or their dependent.
4. In case of death: In case of death of the account holder, the nominee or legal heir can withdraw the entire balance in the PPF account.
It is important to note that premature withdrawals will reduce the interest earned on the PPF account. Also, once a withdrawal is made, the account will continue for a period of 5 years from the end of the year in which the withdrawal was made.
It's also worth mentioning that loans can be taken against the PPF account after
completion of 3 financial years, subject to certain conditions.
Contact us to help with your PPF account and financial planning.
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