Public Provident Fund: Eligibility, Benefits & Features


Fincrif India

Aug 12

05:02 AM

For India's middle class, the PPF remains one of the most reliable investment options. Its status as a government-backed plan and a relatively secure investment is one of the factors contributing to its ongoing popularity since its introduction in 1968.

Public Provident Fund: Eligibility, Benefits & Features

For India's middle class, the PPF remains one of the most reliable investment options. Its status as a government-backed plan and a relatively secure investment is one of the factors contributing to its ongoing popularity since its introduction in 1968. 

Therefore, you will be eager to learn all the information about this instrument if you want to start investing in a PPF account. Every response to a query that a person might have before opening a PPF account has been compiled and presented here.

What is a PPF account?

Public Provident Fund, or PPF for short, is a type of investment vehicle. The National Savings Institute introduced it for the first time in 1968. The PPF is special, and investing in it can help you save money and generate substantial profits. 

Another name for the PPF is "savings-cum-tax savings" investment. The money you put in a PPF does not subject you to tax. Furthermore, you are not required to pay taxes on the interest it generates. 

This investment vehicle operates as follows. A PPF account is comparable to a membership. You must deposit money in multiples of fifty, ranging from a minimum of 500 rupees to a maximum of 1,50,000 rupees per year.You can invest more money in this investment cycle by extending it by an additional five years, which will make it last for 15 years.

What are the essential features of a PPF account?

Examine a few of PPF's qualities before deciding to begin a long-term relationship with it.

  • PPF accounts are limited to one per individual. It is prohibited to have more than one PPF account.

  • For a child in their care, a parent or guardian can open a PPF account.

  • The PPF plan prohibits the use of joint accounts.

  • With a minimum deposit of Rs. 500 and a maximum deposit of Rs. 1,50,000 each year, a person must deposit money in multiples of fifty.

  • These deposits can be made in one payment or over time.

  • If someone doesn't make the required minimum deposit within a year, their account is considered cancelled.

  • If you have a discontinued account, you are unable to open another PPF account.

  • Cash, checks, DDs, and online fund transfers are all acceptable methods of depositing funds into the PPF account.

  • When you open the account, you can name a nominee.

  • The Finance Ministry determines the interest that will be credited to the PPF account each year. It is currently set to 7.1% in 2021.

  • The lowest amount deposited is used to compute the monthly PPF interest rate. Every month, after the fifth, this calculation is made.

  • Therefore, PPF customers are recommended to deposit their money after the fifth of every month.

  • Instead of being credited monthly, the interest is added to the account at the conclusion of the fiscal year.

The PPF account has some of these important and distinctive characteristics.

What are the benefits of a PPF account? 

How come a PPF account needs to be opened by a person? Listed below are a few of the main advantages of PPF investments.

  • Taxes advantages

The significant tax benefit you receive is the main factor influencing people to open a PPF account. If you do not exceed the Rs. 1.5 lakh limit, the principal amount is not subject to taxation. Under Section 80C of the Income Tax Act, rules governing this are outlined. Even at maturity, there is no tax due on the amount that is redeemed. You are therefore permitted to invest up to Rs. 1.5 lakh each year totally tax-free.

  • Returns that are steady and safe

PPFs are secure investments that offer a great deal of security and protection for risk-averse investors because they are government-backed schemes. As it is a government-guaranteed programme, you can easily use this instrument to construct a retirement corpus for yourself.

  • A protracted lock-in period

An investor must commit to a PPF account for fifteen years. As a result, you may easily use the money to plan for your retirement or your children's higher education. You can keep investing even after the 15-year lock-in period has passed by adding five additional years at a time.

  • Limited withdrawals

However, you can only do so after the fifth year. Partial withdrawals are permitted from the PPF account. 50% of your account balance as of the previous year's end is the maximum withdrawal amount.

  • Borrowings against the PPF

Between the third and six years after opening a PPF account, a person may obtain a loan against it. Within three years of the disbursement date, borrowers are required to return the loan amount. 

These were only a few of the numerous advantages of opening a PPF account.

What is the eligibility criteria for opening a PPF account?

It's time to learn what guarantees your PPF eligibility now that you have a better understanding of why you should invest in a PPF account. These prerequisites must be met in order to open a PPF account.

  • No age is required to participate in PPF. Providing a guardian does it on their behalf, minors or people who are mentally ill are permitted to hold PPF accounts.

  • There can only be one PPF account per Indian individual. 

  • No joint accounts are permitted.

  • Opening a PPF account is not permitted for NRIs or HUFs.

Which documents are required to open a PPF account?

The paperwork needed to start a PPF account in India is listed below.

  • Voter cards, Pan cards, or Aadhaar cards are examples of acceptable forms of identification.

  • Formulary for PPF Scheme

  • Residency documentation

  • At a bank branch or the post office, you can pick up a pay-in slip.

  • Signature evidence

  • Pictures the size of a passport

  • Candidature document

The same paperwork as above is needed to open a PPF account at a post office. The copies of the documents you supply just need to have your self-attestation.

How to open a PPF account?

How to register for a PPF account online

Offline PPF account opening follows a straightforward process. To open a PPF account, follow these procedures.

Step1:  Obtain an application at a post office or the closest branch of the bank mentioned above.

Step 2: Fill out the form  with the required KYC paperwork and a passport-sized photo

Step 3. Make the opening deposit and open your account.

Step 4: Following the submission of these documents, you will receive a passbook containing information about the account.

Opening a PPF account online

Here are the steps for creating an online PPF account.

Step 1: You must first have access to an online or mobile banking platform. Apply for the same position if you don't already have one.

Step 2: Use online or mobile banking to access your bank account.

Step 3: Choose an "Open PPF Option.

Step 4: Choose "Self Account" if you are making the account for yourself. Select "Minor Account" if the account is being set up for a minor.

Step 5: Complete the application form with all the necessary information.

Step 6: Select the annual deposit amount and enter it.

Step 7: Complete the application and submit it.

Step 8:  Your registered mobile number will receive an OTP. The proper field should get it

Step 9: You've successfully opened a PPF account after completing 

Step 10: The screen will show your PPF number 

Step 11:  You should receive an email containing all the account information.

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