Public Provident Fund (PPF) – Reference Guide

Public Provident Fund (PPF) is a popular Government sponsored savings scheme where the applicable interest rate is declared on a quarterly basis. While starting the scheme in 1968, the main purpose was to provide long term retirement solution to the working class who are not covered in retirement schemes. Advantages include tax benefits and higher interest rates.

The latest interest rate for the quarter starting from 1st April 2019 is 8.0 %.

PPF Calculator

If you cannot view Online PPF calculator here, click the link to open a non AMP version.

Public Provident Fund (PPF) – Salient features

• As PPF is a Government Sponsored scheme, the Principal and Tax earned from the account has Sovereign Guarantee from Government of India.
• Principal invested in the account qualifies for tax exemption u/s 80C of the income tax act.
• Interest earned from the PPF account is tax exempt u/s 10 of the income tax act.
• PPF is a 15-year scheme with a facility to get extended indefinitely for 5-year blocks thereafter.
• The PPF account is protected from being attached by a court under the Government Savings Bank act, 1873.

Who can open a Public Provident Fund (PPF) account? (Eligibility)

Any individual who is a resident of India can open a PPF account. Parents can open PPF accounts for their minor children.

Even though NRI’s are not allowed to open an account, they can continue an already opened account if the account was opened before the status change. He can continue to subscribe to the fund till the maturity but cannot it extend it further.

One point to remember is that opening multiple accounts by an individual and opening joint accounts are not allowed.

How to open a Public Provident Fund (PPF) account?

You can open a PPF account at nationalized banks, and major private sector banks and even in a post office as well. While almost all the banks offer offline PPF account opening, some banks allow online account opening. If online facility is available, you can do an online transfer to the PPF account from any bank account.

List of banks offering online PPF account.

Here is a compilation of banks offering online Public Provident Fund (PPF) account opening. You can login to the bank account of respective banks and start a PPF account.

1. Allahabad Bank
2. Andhra Bank
3. Axis Bank
4. Bank of Baroda (BOB)
5. Bank of India (BOI)
6. Bank of Maharashtra
7. Canara Bank
8. Central Bank of India
9. Corporation Bank
10. Dena Bank
11. HDFC Bank
12. ICICI Bank
13. IDBI
14. Indian Bank
15. Indian Overseas Bank (IOB)
16. Oriental Bank of Commerce(OBC)
17. Punjab National Bank (PNB)
18. State Bank Of India
19. Syndicate Bank
20. UCO Bank
21. Union Bank of India
22. United Bank of India
23. Vijaya Bank

Documents needed to open a PPF Account

1. PPF Account opening form (Form A). (Can be downloaded from respective bank sites)
2. Proof of identity. (Driving license, PAN card, passport, voter’s id)
3. Address proof or proof of residence
4. PAN Card
5. Aadhaar Card
6. Photograph (Passport size) of the account holder (2 copies)
7. Nomination form

Documents required – PPF account opening for a minor

1. Proof of identity (Parent)
2. Address proof (Parent)
3. Photograph of parent/guardian (2 Nos)
4. Age proof document of the minor (Birth Certificate/School Leaving Certificate).
5. Form A

LIST of KYC documents for PPF opening

Public Provident Fund – PPF – Points to keep in mind

Tenure of PPF account

All PPF accounts mature after the expiry of 15 years from the end of the financial year in which account was opened. At maturity, you can extend the maturity of PPF account by 5 years at a time. In short, all PPF account will mature on the 31st of March irrespective of opening date.

For Example, if the account was opened on 1st Jan 2000 the maturity date of the account will be 31st March 2015.

Maximum and Minimum amount to be deposited in a PPF account

• Minimum amount to be deposited in a PPF account is Rs 500 per year.
• The maximum amount that can be deposited in a PPF account is Rs. 1,50,000.
• The subscriptions should be in multiples of Rs.5 and can be paid in installments not exceeding 12 in a financial year.
• Penalties apply if the minimum deposit is not made in a financial year.

PPF – Interest rate and its calculation

PPF interest rate is notified by the Government Of India from time to time. Previously, interest was declared on a yearly basis, but from October 2018 it is declared on a quarterly basis.

In PPF the interest is calculated on a monthly basis but it is credited into the account at the end of the financial year on March 31. Interest becomes payable for that month if the deposit is made before 5th of that month.

Withdrawal from PPF account – after and before maturity

Normally anybody can withdraw from his PPF account after the maturity (After the completion of 15 Years). Partial or full withdrawal from the PPF account is allowed after the completion of 5 years from the date of account opening subject to certain conditions. Refer the table given below for a better understanding of withdrawal options and restrictions.

Public Provident Fund -PPF- withdrawal after maturity

The entire amount and the interest can be withdrawn from PPF account after completion of 15 years. If entire amount is not withdrawn at maturity, the account will get automatically extended for a period of 5 years. Extension can be

1. Simple extension – without further contribution. But existing deposit amount will receive interest as per the declared rate from time to time.
2. With contribution extension -Fresh money is contributed to the account during the extension period. Interest will be accrued in the same way as it was before the extension.

Withdrawal after simple extension

If you are withdrawing the amount from the PPF account after the extension of 5 years, you can withdraw only up to the balance amount in the account at the time of the extension. Further to add you can do only a single withdrawal in a particular year.

Withdrawal after extension with contributions.

You can extend the contribution for further money investment within one year from the date of extension. In order to effect extension, you will have to submit Form H within a period of one year from the date of extension of PPF account.

PPF withdrawal before maturity

If you want to withdraw the amount during the extension period in this option, You can make a withdrawal only up to 60 % of the accumulated amount at the time of the extension.

Premature PPF closure

Premature closure is allowed only after completion 5 years from the date of account opening. PPF Premature closing is allowed on following grounds only.

1. Life-threatening disease or serious diseases faced by account holder/spouse/children.
2. Higher education of children with proper proofs.

A penalty of 1 % interest deduction from the respective declared rates will become applicable for all the completed years if premature closure is done. For example, if you have gained an average interest rate of 7.6% per annum for five years, the applicable interest will be reduced to 6.6%.

PPF Partial Withdrawal

Partial withdrawal can be done after the completion of 5 years without showing any reason and the maximum amount allowed is 50% of the balance available in the PPF account. You will have to apply for partial withdrawal using Form C.

Loan From PPF account

Loan facility is available from the 3rd financial year up to the 6th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% more than the prevailing interest on PPF. However, the rate of interest of 1% more than PPF interest p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2013.

Up to a maximum of 25 percent of the balance at the end of the 2nd immediately preceding year would be allowed as loan. Such withdrawals are to be repaid within 36 months.

Public Provident Fund (PPF) – Tax benefits

PPF falls under the EEE (Exempt, Exempt, Exempt) method of taxation.

• The first ‘exempt’ here means the investment done qualifies for income tax rebate u/s 80 C of the income tax act(up to Rs 1,50,000).
• The second ‘exempt’ means the interest earned from the scheme is also exempt from taxation.
• The third ‘exempt’ means the maturity amount is not taxed at the time of withdrawal.

All the withdrawals from PPF including premature withdrawal and partial withdrawal are exempt from taxation.  Contributions to PPF accounts of the spouse and children are also eligible for the tax rebate u/s 80C.

NPS Vs PPF

Both NPS and PPF are government sponsored savings schemes but they are different to the core. NPS is a pure pension scheme but PPF is not. But PPF can be used to accumulate pension fund. The risk profile of these schemes is also different. PPF is a highly secured investment but NPS is equity oriented and naturally, risk element is high.

Read More: NPS-National Pension system- every thing you need to know

Public Provident Fund (PPF) – Frequently asked questions.

Anish L J

Anish L J is a ‘Financial Planner’ and member of Chartered Insurance Institute(CII), London and Insurance Institute of India. He is also a finance, insurance and software consultant. He thoroughly follows the developments in finance, insurance, and other related sectors.