Public Provident Fund (PPF) is such a long term investment that any Individual (whether Salaried or Self-Employed) can invest and earn a handsome tax-free return.

PPF Scheme is a statutory scheme of the Indian Government under the provisions of the Public Provident Fund Act, 1968. This scheme was introduced by the central government of India in 1968.

Where can I open PPF Account?

  1.  To open a PPF account, drop by a State Bank of India branch. SBI’s subsidiary banks can also open accounts. A list of these subsidiary banks is available on the bank’s Web site. You can even visit the nationalised bank in your neighborhood. Selected branches of nationalised banks can also open accounts. The head post office or selection grade sub-post offices also open PPF accounts.
  2. You will have to fill up a form. You can take a look or download the form from SBI’s web site. Along with the form, attach a photograph and submit your Permanent Account Number. If you do not have a PAN, then furnish an attested copy of your ration card, voter’s identity card or passport. When you open an account, you will be given a passbook (just like a bank pass book) in which all subscriptions, interest accrued, withdrawals and loans are recorded.

Who is eligible and who is not?

  1. Any Individual (whether Salaried or Self-Employed or any other category) can invest in this scheme. HUFs are no more allowed to open any PPF account.
  2. NRI’s are not allowed to subscribe to PPF Account. However, if someone opens a PPF Account while he is a Resident of India but subsequently becomes a NRI, he shall be allowed to continue investing in his account.
  3. You can have only one PPF account in your name. If, at any point, it is detected that you have two accounts, the second account you have opened will be closed, and you will be refunded only the principal amount, not the interest.
  4. You cannot open a joint account with another individual. The account can only be opened in one person’s name. You are free to nominate one or more individuals. On the death of the account holder, nominees cannot keep the account going by making contributions. If there are no nominees, the legal heirs get the money. You can open one account for yourself and others for your child/ children. But, on your death, your children cannot make any additional contributions.

What is the rate of Interest?

Recently there were some changes made in the PPF interest rates i.e. w.e.f 1st April 2012 the new PPF rate of interest became 8.80% pa compounded annually. Till 1st Dec 2011 the maximum limit investemnt into PPF was Rs. 70,000 pa, but then it increased to Rs. 1,00,000 along with its rate of interest from 8.00% pa to 8.60% pa. Current maximum limit of investment has been kept at Rs. 1,00,000 pa.

Update March 25, 2013; w.e.f April 1, 2013 PPF interest rate has been kept at 8.70% compounded annually.

How much can I invest in a PPF Account?

The minimum amount to be deposited in this account is Rs. 500 per year. The maximum amount one can deposit every year is Rs. 1,00,000 w.e.f 1st Dec 2011. Total of 12 deposits can be made in a financial year. After a/c opening passbook will be given with all entries like deposits, loans, withdrawals, repayment etc.

Is it possible to transfer funds/invest in PPF Account online?

Yes, it is possible in case the PPF account is at SBI only. PPF account opened other than SBI, then it would not be possible, because only SBI is authorised to get online payments for PPF. You can also add the PPF account of your spouse and children in the bank account to make the online payment. You can do this simply using the Third Party Transfer or NEFT (National Electronic Funds Transfer).

Is there any specific term to continue?

The PPF account is valid for 15 years. The entire balance can be withdrawn on maturity, that is, after 15 years of the close of the financial year in which you opened the account. So, if you opened it in FY 2011-12 (this financial year), you will be able to withdraw it 15 years later, starting March 31, 2012 (end of this financial year). That means your PPF matures on April 1, 2027. It can be extended for a period of five years after that. During these five years, you earn the rate of interest and can also make fresh deposits. Once your account expires, you can open a new one.

Is withdrawal from PPF Account between the terms possible?

Withdrawal is permissible from seventh financial year from the year of opening, limited to one in a financial year. Amount of withdrawal is limited to 50% of balance at the end of the fourth preceding year less amount of outstanding loan or 50% of balance at the end of immediate preceding year of withdrawal less amount of outstanding loan, if any whichever is less. If the account extended beyond 15 years; partial withdrawal allowed up to 60% of the balance to the credit at the commencement of the extended period (block of five years).

Is it possible to open a PPF Account in the name of a minor?

Yes, you can open a PPF account on behalf of a minor child as a guardian or parent(s). No Nomination shall be made in respect of an account opened on behalf of minor. Nomination can be made in the name of one or more persons. Nominee cannot continue account of the deceased subscriber in his/ her own name. If nomination is not made in case of death of the a/c holder, upto Rs.1 lakh will be given to legal heirs.

Is loan available on PPF Account?

Loans can be availed from the 3rd financial year excluding the year of deposit. Amount of such loans must not exceed 25 percent of the amount that stood to the account holder’s credit at the end of the second year immediately preceding the year in which the loan is applied for.

A fresh loan is not allowed when a previous loan or interest is outstanding.

Can I get tax benefit by investing in PPF Account?

  1. Benefit u/s 80C – The Investments made in PPF Account are eligible for deduction subject to the maximum limit or Rs. 1,00,000 pa u/s 80C.
  2. Tax Free Interest – No Tax is payable on the Interest Earned on PPF Account.
All about Public Provident Fund (PPF) Scheme

20 thoughts on “All about Public Provident Fund (PPF) Scheme

  • April 19, 2013 at 11:19 AM
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    hello Bhuvaneshwar,

    Last two days, I have gone through few articles in this website. those are very informative and website design also looks very good. I appreciate your efforts in making the content and publishing it.

    In this article, i could see one factor is missing…..

    1. How the interest will be calculated ? Do you have any calculator if any person paying monthly. If possible, please add the same.

    Thanks,
    Sreedhar.

    Reply
    • April 19, 2013 at 11:44 AM
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      Hi Sreedhar, thank you for your kind appreciation. I also welcome your suggestions. I will surely add such tools/calculators in my future articles.

      Fyi, PPF interest is calculated on the lowest balance between 1st and 5th of every month. Let’s say you have Rs. 1,00,000 in your PPF account. On the 9th of a month, you deposit an additional Rs. 10,000, your interest will be calculated on Rs 1,00,000 (not Rs 1,10,000) for that month. So make sure you deposit in PPF account between 1st and 5th of every month to earn interest on your contribution for that month.

      Reply
      • April 19, 2013 at 12:44 PM
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        Thank you for the quick updates – Bhuvanesh.

        Reply
    • January 5, 2014 at 10:28 PM
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      If i contribute one lakh in March, do i eligible to contribute another one lakh in April as it belongs to next financial year. Is it safe to open PPF account with ICICI Bank? please advise.

      Reply
  • May 31, 2013 at 7:31 PM
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    good evening sir
    i am having a ppf a/c in pnb but i want to transfer it in sbi .
    how can i do this as sbi’s ppf a/c is accepting online transactions but other banks are not having this facility

    Reply
  • June 14, 2013 at 12:16 PM
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    Hi…I have a PPF account in my own name and I deposit 1 lac per annum in this account. Can i open one more account in my minor daughter’s name and deposit additional 1 Lac every year in that account. Will I get interest on the addl 1 lac deposited in the minor’s account? I understand that I will not get the tax benefit beyond the 1 lac total. My concern is mainly on interest.

    Reply
    • June 14, 2013 at 1:21 PM
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      Hi Vikas,

      Of course you can get the PPF account opened in your minor daughter’s name (jointly with you as parent/ guardian). You are right that you may not get additional 1lac of 80C tax benefits, but don’t worry about the interest, you will still get it for these additional investments.

      Reply
  • June 11, 2014 at 11:36 AM
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    Hi Bhuvaneshwer,
    I do have saving account in SBI. I want to know, Is it possible to open PPF account online ? If yes then how can i do it ?. Is it necessary to go in bank and feel form to open it.

    Thanks in advance.

    Reply
  • June 23, 2014 at 12:58 AM
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    Great Post! Thanks for sharing.

    Reply
  • June 23, 2014 at 3:02 PM
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    Hi Bhuvaneshwer,

    You are providing the better information to us. I have small query. I have opened PPF account with ICICI in june 13 and investing 3k per month (Total having 30K @ March 14). So what would be the interest amount at 1st of April.

    Reply
    • June 23, 2014 at 9:24 PM
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      Hi Kiran,

      It would be approx. Rs. 31,158.98 on April 1, 2014 i.e. Rs. 1,158.98 as interest accumulation for the FY 2013-14. This may not be the exact figure what you might have got, but there won’t be a big difference to this :-). Have you updated your passbook or checked it online? What did you see?

      Reply
      • June 24, 2014 at 1:37 PM
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        Hi Bhuvaneshwer,

        Thanks for quick response. i got 1131. Actually i thought it could be less. Thanks again. I also want to know how interest is calculated or do you have any self made PPF calculator.

        Reply
        • June 24, 2014 at 5:35 PM
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          Hi Kiran,

          PPF interest is calculated monthly on the lowest balance between the end of the 5th day and last day of month, however the total interest in the year is added back to PPF only at the end of the year. Since you are investing monthly basis, what you can do is Just divide 8.70% (PPF interest for FY 2013-14) by 12 to know what would be the monthly interest. This you can apply for June 2013 investment for 10 months compounding, then you do the same for July 2013 investment for 9 months compounding and so on till March 2014 investment which is for 1 month. Finally add all, you will get a your desired figure.

          Reply
  • June 24, 2014 at 6:25 PM
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    Hi Bhuvaneshwer,

    Thanks again for quick reply. I have calculated, it is not matching but near to the amount.
    Now all the doubts are clear… Thanks again.

    Reply
    • June 27, 2014 at 8:20 AM
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      You are most welcome Kiran.

      Reply
  • September 30, 2015 at 4:05 PM
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    Hi Bhuvi,

    Can I invest random amount of money in my PPF account every month?

    Reply
    • October 1, 2015 at 6:39 PM
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      Hi Anurag,

      Yes you can do, but upto 12 transactions with max contributions upto Rs. 1,50,000 per financial year

      Reply

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