Public Provident Fund (PPF) - 2024 Guide

The Public Provident Fund (PPF) is a widely favored long-term savings scheme in India known for its blend of tax benefits, attractive returns, and safety. Established by the Finance Ministry's National Savings Institute in 1968, PPF aims to facilitate small savings and provide a secure return on investments.

Key Features of PPF

• Tenure: 15 years (can be renewed in blocks of 5 years)
• Interest Rate: 7.1% (annually compounded)
• Investment Limits:
  • Minimum: ₹500 per annum
  • Maximum: ₹1.5 lakh per annum
• Maturity Amount: Dependent on the investment tenure

Eligibility

• Must be an Indian citizen.
• Only one PPF account is allowed per individual unless the second account is for a minor.
• Hindu Undivided Families (HUFs) and Non-Resident Indians (NRIs) cannot open new PPF accounts. Existing accounts remain active but cannot be extended.

How to Open a PPF Account

At Banks:

1. Visit a participating bank (e.g., Axis Bank, HDFC Bank, ICICI Bank).
2. Submit the application form along with ID proof (Aadhaar, PAN card, passport), address proof, and signature proof.
3. Deposit the required initial amount.

At Post Offices:

1. Obtain and complete the PPF account opening form.
2. Submit KYC documents and a passport-sized photograph.
3. Make the deposit to activate the account.

Account Closure

• Maturity: Full balance can be withdrawn after 15 years.
• Premature Withdrawal: Allowed up to 50% of the account balance after 5 years for specific purposes (e.g., medical emergencies or higher education).
• Premature Closure: Permitted under certain conditions such as severe illness or higher education.

Features

• Deposit Frequency: Annual or up to 12 installments.
• Nomination: Optional.
• Mode of Deposit: Cash, cheque, demand draft, or online transfer.
• Risk: Government-backed, risk-free.

Loan Against PPF

• Available from the third to the sixth year of the contribution.
• Loan amount up to 25% of the account balance.
• A second loan can be taken if the first is fully repaid.

Interest Rate

• Currently set at 7.1% annually.
• Interest is compounded yearly and credited on March 31.
• Calculated based on the lowest balance between the 5th and the end of each month.

Tax Benefits

• Contributions are tax-deductible under Section 80C of the Income Tax Act.
• Interest earned and the maturity amount are tax-exempt.

Online and Post Office Procedures

Online:

1. Log in to internet banking.
2. Select the appropriate account type.
3. Complete and submit the application form.
4. Verify using OTP.

Post Office:

1. Obtain and complete the form.
2. Submit necessary documents and deposit.
3. Receive the passbook.

Account Transfer

1. Submit a transfer request at the current branch.
2. Provide the required documents.
3. Open a new account at the receiving branch.
4. Transfer process will be completed by the banks/post offices.

Reactivating an Inactive Account

1. Submit a reactivation request letter.
2. Pay the pending contributions and penalties.
3. Account will be reactivated after processing.

Limitations

• Interest rates are lower compared to some other investment options.
• No joint accounts allowed.
• Annual investment limit is capped at ₹1.5 lakh.
• Lock-in period of 15 years is longer compared to some other savings schemes.

FAQs

• Can I open a joint PPF account?
  No, PPF accounts can only be held in one individual’s name.
• How do I convert a minor PPF account to a major one?
  Submit a revised application form with necessary documents once the minor turns 18.
• Can I extend the PPF account?
  Yes, extensions can be made in 5-year blocks after the initial 15-year period.
• What happens if I die before maturity?
  The funds will be transferred to the nominee or legal heirs.
• Is it necessary to name nominees?
  While not mandatory, it is advisable to name nominees for ease of fund transfer in case of death.
• How to claim funds from an inactive account?
  Reactivate the account by paying pending contributions and penalties.

This guide provides a comprehensive overview of the PPF scheme, including how to open, manage, and close a PPF account, along with its features and benefits.