If you are considering wealth management as your Goal, then your first step should be accumulating savings. There are plenty of options available; however, you must choose those that guarantee substantial returns without any risk. PPF accounts are one of the choices which come into the picture. PPF account refers to the Public Provident fund account, so here you can invest your savings risk-free. If you are an employee, have got a job recently, or are a responsible parent who wishes to save for the future, PPF is ideal. Calculating the interest rates and returns on your PPF account turns a bit difficult. Quickly calculate your PPF Interest now.
This article answers the below-mentioned points on PPF:
- What is PPF ?
- How to open a PPF Account ?
- What are the essential features of PPF ?
- What are the Tax Benefits of investing in PPF ?
- What is the Mode of Tax Savings through PPF?
- How is PPF interest calculated?
- What are the PPF Withdrawal Rules ?
- What is the Procedure for withdrawal from PPF?
- What are the Alternative Investment Options to PPF ?
- Frequently Asked Questions
Q1. What is PPF?
Public Provident Fund (PPF) was introduced with an aim to mobilize small savings in investments towards better usability. This was done in 1968 to ensure a return on it. It remains a favourite savings avenue for many investors as the returns are tax-free. It is used as a savings-cum-tax savings investment vehicle as it builds a retirement corpus as well as saving on annual taxes. Thus it is a favourite instrument for anyone who looks for a safe investment option to save taxes and earn guaranteed returns. It remains a favourite savings avenue for many investors as the returns are tax-free.
Q.2. How to Open a PPF Account?
You can open a PPF account with either a Post Office or with any nationalized bank like the State Bank of India or Punjab National Bank, etc. These days, even certain private banks like ICICI, HDFC and Axis Bank, among others, are authorized to provide this facility. You need to submit the duly filled application form and the required documents, i.e. the KYC documents like identity proof, address proof, and signature proof. Post submitting these documents, you can deposit a prescribed amount towards the opening of the account.
Q3. What are the essential features of PPF?
👉 Tenure: The PPF has a minimum term of 15 years, extendable in blocks of 5 years as per your wish.
👉 Investment Limits: PPF allows a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh for each financial year. Both Lump-sum and maximum of 12 SIP installments.
👉 Opening Balance: The account can be opened with just Rs 100. Annual investments above Rs 1.5 lakh will not earn interest and will not be eligible for tax savings.
👉 Deposit Frequency – Deposits into a PPF account must be made at least once every year for 15 years.
👉 Mode of deposit – You can make the PPF deposit through cash, cheque, Demand Draft or an online fund transfer.
👉 Nomination – A PPF account holder can designate a nominee for his account either at opening the account or subsequently.
👉 Joint accounts – Only an Individual can hold a PPF account. Opening a joint account is not allowed.
👉 Risk factor – Since the Indian government backs PPF, it offers guaranteed, risk-free returns and complete capital protection. The element of risk involved in holding a PPF account is minimal.
👉 Who can invest in PPF – Any Indian citizen can invest in PPF. One citizen can have only one PPF account unless the second account is in the name of a minor. NRIs and HUFs are not eligible to open a PPF account.
👉 Loan against PPF – You can take a loan against your PPF account between the 3rd and 5th year. The loan amount can be a maximum of 25% of the 2nd year immediately preceding the loan application year. You can get a second loan before the 6th year if the first loan is repaid fully.
Q.4. What are the Tax Benefits of Investing in a PPF?
PPF is a special investing scheme that falls under the Exempt-Exempt-Exempt (EEE) category, which means that all deposits made in the PPF are deductible under Section 80C of the Income Tax Act. Furthermore, the accumulated amount and interest are also exempt from tax at the withdrawal time.
Please remember that a PPF account cannot be closed before maturity. HOWEVER, a PPF account can be transferred from one point of designation to another. But, do remember premature closing of a PPF account is not allowed. If the account holder dies, then only can the account be closed. The closing is filed by the nominees. PPF contributions up to 1.5 Lakhs are eligible for Section 80C of the Income Tax Act, 1961. PPF accounts also have a deposit limit of Rs.1.5 lakhs per year. Therefore, all deposits made to your PPF account can be claimed as deductions u/s 80C. Section 80C allows for a maximum deduction of Rs.1.5 lakhs per year inclusive of all investment instruments.PPF accounts also offer other tax benefits. Interests earned from PPF deposits are tax-free, while wealth tax is not applicable on PPF accounts and proceeds. Therefore, PPF accounts offer you triple exemption benefits – deduction on deposits, tax-free returns and no wealth tax.
Q.5. What are the Alternatives to a PPF?
Section 80-C provides PPF with EEE benefits (Exempt, Exempt, Exempt). i.e. investment up to Rs. 1.5 lakhs annually. Here EEE denotes returns you earn, and the corpus on maturity are exempted from tax. Now, what can compare to this? You think ELSS with the lowest lock-in period. Well, you can opt for this as a long-term investment of < 5 years. The longer you invest, the more tax you will save, not to mention earn inflation-beating returns. Few alternate options to PPF
Q6. What are the Alternatives to a PPF?
The formula for this is: F = P[({(1+i)^n}-1)/i]
Here, F = Maturity proceeds of the PPF
For example, if you make annual payments of Rs. 1,00,000 towards your PPF investment for 15 years at 8.0%, your maturity proceeds at the end of 15 years would be Rs. 31,17,276 .
Table for PPF Interest Rates till now.
| Period | Year | PPF Interest Rates |
|---|---|---|
| 1st April 2020 to onwards | 2020-21 | 7.1% |
| 1st January 2020 to 31st March | 2019-20 | 7.9% |
| 1st October 2019 to 31st December 2019 | 2019-20 | 7.9% |
| 1st July 2019 to 30th September 2019 | 2019-20 | 7.9% |
| 1st April 2019 to 30th June 2019 | 2019-20 | 8.0% |
| 1st January 2019 to 31st March 2019 | 2018-19 | 8.0% |
| 1st October 2018 to 31st December 2018 | 2018-19 | 8.0% |
| 1st July 2018 to 30th September 2018 | 2018-19 | 7.6% |
| 1st April 2018 to 30th June 2018 | 2018-19 | 7.6% |
| 1st January 2018 to 31st March 2018 | 2017-18 | 7.6% |
| 1st October 2017 to 31st December 2017 | 2017-18 | 7.8% |
| 1st July 2017 to 30th September 2017 | 2017-18 | 7.8% |
| 1st April 2017 to 30th June 2017 | 2017-18 | 7.9% |
| 01st January 2017 to 31st March 2017 | 2016-17 | 8.0% |
| 1st October 2016 to 31st December 2016 | 2016-17 | 8.0% |
| 1st July 2016 to 30th September 2016 | 2016-17 | 8.1% |
| 1st April 2016 to 30th June 2016 | 2016-17 | 8.1% |
| 1st April 2015 to 31st Mar 2016 | 2015-16 | 8.7% |
| 1st April 2014 to 31st Mar 2015 | 2014-15 | 8.7% |
Q7. What are the PPF withdrawal rules?
As a rule, one can close a PPF account only upon maturity, i.e. after the completion of 15 years. Upon completion of 15 years, the entire amount standing to the credit of an account holder in the PPF account along with the accrued interest, can be withdrawn freely, and the account can be closed.
However, if account holders require funds and wish to withdraw before 15 years, the scheme permits partial withdrawals from year 7, i.e., completing 6 years.
An account holder can prematurely withdraw a maximum of 50% amount in the account at the end of the 4th year (preceding the year in which the amount is withdrawn or at the end of the preceding year, whichever is lower). Further, you can draw only once in a financial year.
The PPF account matures after completing 15 years calculated from the account opening day. After maturity, you can withdraw the entire PPF account balance. However, after the end of the 6th year, PPF subscribers can make partial withdrawals from their accounts. The qualifying amount for partial PPF withdrawal is automatically calculated by the PPF calculator and is the lesser of the following amounts:
Option1. 50% of the PPF account balance in the year preceding the year of a loan application or
Option2. 50% of the PPF account balance in the 4th financial year preceding the loan application year.
Q8. What is the PPF withdrawal procedure?
If you wish to wholly or partially withdraw PPF amount, you can submit withdrawal application form in Form C with the bank where your PPF account lies. This form is available for download here.
This form has three sections:
1. Declaration section where you must provide your PPF account number and the amount of money you propose withdrawing. Along with that, you also need to mention years of your account existence.
2. Office use section which comprises of details like:
👉 PPF account opening Date.
👉 Total balance standing in the PPF account.
👉 The date on which the previously requested withdrawal was allowed.
👉 Total withdrawal amount available in the account.
👉 The amount of money sanctioned for withdrawal.
👉 Date and signature of the person in charge – usually the service manager.
3. Bank details section, which asks for the details of the bank where the money is to be credited directly or the bank in whose favour the cheque or the demand draft is to be issued. It is also mandatory to enclose a copy of the PPF passbook and this application.
9.What is the Mode of Tax Savings through PPF?
Suppose your yearly income is Rs.6 lakhs. Your benefits with and without claiming deductions under Section 80C will be as follows:
| With deductions | Without deductions | Income |
|---|---|---|
| Rs.6 lakhs | Rs.6 lakhs | |
| Exempted income | Rs.2.5 lakhs | Rs.2.5 lakhs |
| Deductions u/s 80C | Rs.1.5 lakhs | - |
| Taxable income | (6-2.5-1.5)=Rs.2 lakhs | (6-2.5)=Rs.3.5 lakhs |
| Income tax (@ 20%) | Rs.40,000 | Rs.70,000 |
| Cess (@ 3%) | Rs.1,200 | Rs.2,100 |
| Net tax | Rs.41,200 | Rs.72,100 |
As you can see by investing in a savings instrument like PPF, you can potentially save Rs.31,900 in income taxes every year. And this does not include the benefits on the interests that you earn while staying invested in PPF. As such, PPF investments are a great opportunity at long term savings for everyone.
FAQ
The lock-in period of PPF account is 15 years from the date of opening.
Can we continue PPF after 15 years?
After the 15 years lock-in period you can extend its maturity by submitting an application. You can extend your PPF account for a block of 5 year.
When we can withdraw PPF amount?
After the lock-in period of 15 years subscriber can be withdrawn full amount. As well subscriber can withdraw partial amount before maturity period 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.
Can we extend tenure with contribution?
you can extend your PPF account for a five year block by submitting Form H in bank within one year from the date of maturity. You can deposit money during the tenure. After completion of five year you can again apply for extension as there is no limit in the number of extensions.
Can we get loan against PPF account?
Yes, you can. Loan facility can be available from 3rd financial year up to 5th financial year. Read more.
What if failed to deposit money to ppf account?
If you are failed to invest minimum amount in any financial year, then account will be deactivated. It can be reactive to pay Rs.50 as penalty for each inactive year. Also you have to deposit Rs.500 for each inactive year's contribution.
Can we define nominee to PPF account?
Ofcourse, you can. You can define your nominee to one or more persons. You can also define shares to each nominee. In case death of account holder then the balance amount will be paid to his nominee or legal heir even before 15 years. Nominees or legal heirs are not eligible to continue the account of the deceased.
Can we close PPF Account before maturity period?
The Public Provident Fund Scheme, 2016 made an amendment in PPF Scheme, 1968 to facilitate premature closure of PPF account. You can opt for premature closure of your PPF account after completion of 5 years for medical treatment of family member and for your higher education. In case of premature closure, you are required to pay 1% of your balance amount as penalty to bank.
When will PPF interest rate change?
PPF interest rate is changing every year so subscribers should keep eye on it. However, there is no pre-determined dates when the ppf interest will be change. But if you are subscriber then you need to keep in mind that the PPF interest rate revision will usually happen during the last week of March in a financial year and will come into effect during 1st April. Some times the revision in Interest Rate will change during April and the same will be implemented / comes into force during April 1st week of the same year.
Is PPF amount tax free?
Yes, Deposits made under this scheme can be claimed as deductions under section 80C. Interest earned on these deposits are also tax-free.
How much tax can be save on PPF?
You can invest Rs. 1,50,000 in PPF and you can save applicable tax on this amount.
Can I deposit more than 1.5 lacs in ppf?
A PPF account holder can deposit a maximum of Rs 1.5 lacs in his/her PPF account (including those accounts where he is the guardian) per financial year. Any amount deposited in excess of Rs 1.5 lacs in a financial year won't earn any interest.
How many times we can deposit money in PPF account in a month?
There is no monthly deposit provision so you can deposit more than 2 times but maximum 12 times in a financial year.
Which is the best bank to open a PPF account ?
All the nationalized banks are good to open PPF account. Generally, SBI is India's largest and trusted bank so most people's go with SBI.
What is maximum lock in period in ppf account?
The maximum lock-in period of PPF account is 15 years from the date of opening.
Can we withdraw money from ppf account?
Yes, you can withdraw partial amount from the 7th financial year.
Which bank gives highest ppf interest rates?
The Public Provident Fund (PPF) is a savings-cum-tax-saving scheme is introduced by National Saving Institute of the Ministry of Finance and it's not a product of any particular bank so ppf interest rate will same for all the banks as well as post offices.
Can I withdraw money from ppf account before maturity?
Yes, you can withdraw partial amount before maturity.
Is ppf good?
PPF is a very good investment/tax saving option.
Can I take loan from PPF account?
Yes, you can. Loan facility can be available from 3rd financial year up to 5th financial year.
Is PPF withdrawal taxable?
PPF partial withdrawals are not taxable.
Is PPF taxable?
PPF falls in the category of EEE (Exempt Investment, Exempt Return, Exempt Maturity or Withdrawal).Thus, both the deposits and withdrawals are totally tax free.
Is PPF Safe?
Yes, PPF is very safe and long term investment.
How can I get maximum PPF benefits?
PPF interest is no longer fixed and is now depends on government bonds. The interest calculation is done every month and calculated on lowest balances in account between 5th and last day of the month. So if you would like to earn interest for that month then deposit amount on or before 5th of the month.
How many PPF account can a family have?
A family can have multiple PPF accounts: one for each father, wife and one for each child, and so on.
Can a housewife open a PPF account?
Yes, housewife can open PPF account. In addition, husband may deposit own money into her PPF. But since she doesn't have any taxable income, she cannot avail any tax benefit for it. And husband cannot claim any tax benefit on her PPF investments.
Can we deposit cash in ppf account?
Yes, you can. Amount can be deposited in cash, cheque or via demand draft.
Can I open two ppf account in sbi?
No, as per rule, One person can keep only one PPF account but one can maintain another ppf account of spouse/children on behalf of them.
Which bank offers ppf account?
Most nationalized banks are providing facility for ppf account but it depends on branch category. Visit here for List of Banks offering PPF Account & Online Fund Transfer Facility
Can I increase ppf amount?
Yes, you can change deposit amount. You have to deposit the minimum of Rs. 500 in a financial year and maximum Rs. 1, 50,000.
How can I withdraw money from my PPF account after maturity?
You should close your current ppf account to withdraw money after maturity and you will get your money.
Can PPF be withdrawn before maturity?
Yes, you can withdraw partial amount from the 7th financial year.
Is amount received from PPF Taxable?
No, It's tax free.
Can we continue PPF after 15 years?
Yes, you can extend block of 5 years after 15 years.
Can PPF account be extended after 15 years?
You can extent with blocks each of 5 years.
What is different between PPF and EPF account?
EPF is a special mandatory savings scheme only for salaried employees working in government and private sector subject to certain thresholds. Non salaried individuals such as businessmen, self employed professionals are not covered under EPF. The EPF scheme may be run by the respective employer through its own trust or by way of depositing the contributions with EPFO, a government run body that manages EPF money. A salaried person who is covered under EPF is eligible to also open a PPF account.
Is investment in PPF risky?
No, it is not. PPF invests in government bonds. These bonds are backed by the Government of India. The government securities are considered the most secure investment. Your investment is as much risk as the risk of government default. So your investment in PPF are very safe.
