Public Provident Fund- The Complete Guide for 2024

Posted by  Fintra , updated 2023-12-06

It was in 1968 when the Public Provident Fund (PPF) was first introduced by the National Savings Institute of the Ministry of Finance. This is a scheme that enables you to save both, your finance and taxes. The main purpose of PPF is to mobilize small-scale savings accounts with the lure of an investment opportunity, which will provide good returns as well as tax exemption.

PPF happens to be a long-term investment scheme. The minimum and maximum investment amounts are Rs 500 and Rs 1,50, 000, respectively, in one financial year. Loan facilities are available and premature withdrawal and extension of the account are allowed. PPF scheme is fully supported by the Indian Government.

Fintra presents vital information for enhancing your knowledge about Public Provident Funds. This blog will surely be helpful and informative enough for obtaining your PPF account.

Topics covered are as follows:

1. Why open a PPF Account And When Is the Best Time to Invest in PPF?
2. How to open a PPF Account?
3. Eligibility Criteria
4. Tax Benefits
5. List of Banks that offer the PPF
6. Benefits of PPF
7. Disadvantages of PPF
8. Rate of Interest
9. Is Premature Withdrawal/Closure Allowed?

Why open a PPF Account And When Is the Best Time to Invest in PPF?

Public Provident Fund is an ideal scheme for those who have a low-risk appetite. Due to being mandated by the Indian Government, it is backed up with guaranteed returns that will protect the financial needs of the masses in the nation. Moreover, the invested funds in a PPF account aren't market-linked. An investor can even opt for the public provident fund regime to diversify its financial and investment portfolio. In fact, in critical times when there's a downswing of the business cycle, the PPF accounts can benefit by preserving your capital.

Experts advise that the best time to invest in Public Provident Fund (PPF) is between the 1st to 5th of any month, preferably in April every year. This is so because the interest is calculated for the calendar month on the lowest balance in the PPF Account between the end of the 5th day and the end of the month. To gain more information about the same, please click here.

How to open a PPF Account?

PPF accounts can be opened both offline and online. To open a PPF account offline, you have to approach either a post office or a bank. Do bear in mind the PPF facility is not available in every bank but only a designated few such as State Bank of India, ICICI Bank, Punjab National Bank, etc.

To open a PPF account at a designated branch, you need to submit documents such as ID proof, address proof, recent passport size photographs, and your pay-in-slip. Now you have to complete the following steps:

• Get your documents verified by the bank branch. You should self-attest the documents.
• You will be issued with the passbook of your PPF account when it is opened. This passbook will be required when you will be claiming tax benefits.
• When it comes to PPFs, a bank is a more convenient choice than a post office.

To open a PPF Account via the internet, you have to go through the following steps:

• Firstly, choose the designated bank to open your PPF account.
• Then, go to that bank’s website and find out where the link to the PPF account is.
• Usually, every bank has different website structures. However, the process is almost the same- you provide your details, Aadhaar or PAN no, upload your signature and recent passport size photograph.
• Most banks will give you a digital PPF application form, which you will have to download and submit to the nearest branch, along with KYC documents.
• After this, your account should be up and running and your passbook should be issued.

To know what documents are required for opening a PPF account please click here.

To know the list of all the forms in a PPF account please click here.

Eligibility Criteria

Indian residents living in the nation are qualified to open a PPF account in his/her name. Minors are additionally permitted to have a Public provident fund account in their name if it is worked by their parents.

Non-residential Indians are not allowed to open another PPF account. Any current record in their name stays dynamic till the finish of residency. These records can't be reached out for a very long time – an advantage accessible to Indian occupants.

Learn more about the eligibility criteria on this link.

Tax Benefits

Personal tax exclusions are relevant to the chief sum of resources into a PPF as recorded. The whole estimation of venture can be guaranteed for tax waiver under segment 80C of the Income Tax Act of 1961. The absolute premium gathered on PPF speculation is additionally excluded from any tax counts. Whereas, the whole sum reclaimed from a PPF account supply of development isn't dependent upon taxation. This approach makes the public provident fund plot appealing to numerous speculators in India. Get more info about the PPF Taxation by clicking here.

List of Banks that offers the PPF

1. Indian Overseas Bank
2. Axis Bank      
3. State Bank of India    
4. IDBI Bank
5. ICICI Bank    
6. Bank of Baroda          
7. Punjab National Bank
8. Corporation Bank
9. Oriental Bank of Commerce 
10. Bank of India 
11. State Bank of Bikaner & Jaipur         
12. State Bank of Hyderabad
13. Allahabad Bank         
14. Central Bank of India
15. Canara Bank  
16. Union Bank of India
17. Indian Bank   
18. United Bank of India 
19. Dena Bank     
20. Vijaya Bank
21. Bank of Maharashtra 
22. State Bank of Patiala 
23. State Bank of Travancore      
24. State Bank of Mysore

To know more on which banks offer PPF accounts please click here.

Benefits of PPF

By investing in a Public Provident Fund Scheme, you will be able to enjoy the following benefits:

1. The Government of India backs PPF schemes, so it is a completely safe venture. Also, PPF comes in with a lock-in period of 5 years. Hence the return is increased as well as secure.
2. A PPF account is eligible for tax deductions under Section 80C. The interest and the matured amount are both tax exempted.
3. The minimum investment amount of a PPF is Rs 500, keeping it within the reach of people with low income.
4. PPF allows you to enjoy loan facilities starting from the third financial year. Click here to know more. Premature withdrawal is allowed after five years.
5. After the 15-year maturity period of a PPF scheme, the investor can choose to continue the account for another five years if he or she wishes so.

Disadvantages of PPF

Like everything else, the Public Provident Fund Scheme has its drawbacks. The disadvantages of PPF are as follows:

1. The Hindu Undivided Family (HUF), NRIs, or any Trust are not eligible to open a PPF account.
2. The liquidity in a PPF is considerably less than other similar investment schemes.
3. The lock-in period of a PPF account is a long and tenuous period of 15 years. So, if you are looking to make some quick money, PPF is not for you.
4. PPF account has an upper investment limit of Rs 1.5 lakh a year which prevents the subscriber to invest a large amount of money, even if he can.
5. The Public Provident Fund does not allow any joint account.

Rate of Interest

It's the Finance Ministry that sets the interest rate every year that is paid on 31st March. The PPF interest is calculated on the lowest balance that is observed in the PPF account from the fifth day to the last day of each month. Therefore, it is vital to make your PPF contribution before the 5th of every month.

The current rate of interest of a PPF account is 7.10% per annum and it’s compounded annually. Learn more about PPF by clicking here.

Use Fintra's online PPF Calculator to determine the returns one can expect by investing a certain amount in the PPF account.

Is Premature Withdrawal/Closure Allowed?

PPFs have a lock-in period of 15 years. Previously, no premature closure was allowed except in the case of the death of the investor. However, nowadays the rules have become lax. Premature closure is now granted in case of a serious disease of the investor, spouse or dependent children. In the case of higher education of a minor account holder, premature closure will be permitted but only if the legitimate documents are produced.

Premature withdrawal is allowed only after five years of completion of the account. Withdrawal can be as much as 50% of the account balance.

Conclusion

 As we have mentioned above, PPF is known to be a tax-free saving scheme that is regulated by the Indian Government. PPF was invented with the main objective to design a small investment saving scheme that's coupled with a return on it. PPF can also be called a savings-cum-tax savings investment tool that enables an individual to create a retirement corpus while saving on annual taxes. If you're seeking a safe investment option to save taxes and earn guaranteed returns then you must opt for a PPF account.