Basics Of Public Provident Funds (PPF)

Due to its combination of tax savings, returns, and safety, the Public Provident Fund (PPF) plan is a particularly popular long-term savings strategy in India. The National Savings Institute of the Finance Ministry launched the PPF plan in 1968. The scheme's principal goal is to assist consumers in making little deposits and provide returns on those savings. The PPF plans to pay a competitive risk premium and does not demand taxation on the interest earnings.

10 Basics Of Public Provident Funds (PPF)

Here are the 10 basic features of a public provident fund (PPF) Account.

• Eligibility Criteria

  You can invest in the PPF if you are a citizen of India. Moreover, you can open only one PPF account unless your second PPF account is in the name of a minor. 

• Minimum and Maximum Investment

  Individuals must make a minimum annual investment of Rs. 500. A maximum of Rs. 1.5 lakh can be invested in a PPF account in a single financial year.

• Tenure

  With a 15-year lock-in period, PPF is a long-term investment. This means that the money saved in a PPF account can only be withdrawn when the account reaches maturity, which is 15 years after it was opened. At the end of the real lock-in term, this tenure can be extended for another 5 years. 

• Interest on PPF

  Every month, interest on the PPF balance is computed and credited to the PPF account at the conclusion of the financial year. The government announces the interest rates for each quarter in advance. 

Read along: EPF V/S PPF V/S VPF: Which One is Better?    

• Nomination

  You can name a nominee for your PPF account either when you open the account or later. Nominations for the minor's PPF account are not permitted. The account holder's parent, spouse, relatives, children, friends, and others can be nominated.

• Risk Factor

  The PPF is risk-free and delivers guaranteed returns because it is backed by the Indian government.

• Tax Benefits

  PPFs fall within the Exempt-Exempt-Exempt (EEE) category of tax policy. The money invested in a PPF during a financial year is exempt from an individual's taxable income for that year, under Section 80C of the Income Tax Act. In addition, the interest generated on PPF deposits, as well as the accumulated amount, is tax-free.

• Loan against PPF

  A PPF account holder may borrow against his/her PPF balance. The loan can only be taken between the beginning of the third year and the end of the sixth year after the account is opened. The maximum loan amount is limited to 25% of the PPF balance at the end of the second year or the year before the year in which the loan is taken out.

• Joint Account

  Multiple accounts and joint accounts are not permitted. A PPF account can only be held in the name of one person.
  
  

• Withdrawal

  Partially withdrawal of funds from the account is possible when the account has been active for five years.

Note: Before investing in PPF it is really important to go through all the details about the Public Provident Fund interest rate, fund scheme, account opening etc.

Endnotes

If you do not have a risk appetite and only want assured and safe returns, PPF is the way to go. This government-backed asset is a good choice for people looking for long-term risk-free investing options with consistent returns.

Must read: Top Benefits of PPF

Disclaimer: This article is issued in the general public interest and is meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.