PPF Account – Some things you Should Know

Public Provident Fund (PPF) Account , PPF Calculator – Calculate Interest/Returns on PPF Investment, Most, of the people who were waiting to open a PPF account are raising many doubts and queries in their minds. This article helps you to rectify their doubts and makes their way easy to open an account…
PPF Account is the long-term investment plan targeted towards the self-employed class of India. The Public Provident Fund is a savings-cum-tax-saving instrument in India, introduced by the National Savings Institute of the Ministry of Finance in 1968. The aim of the scheme is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits.The scheme is fully guaranteed by the Central Government. Balance in PPF account is not subject to attachment under any order or decree of court. However, Income Tax & other Government authorities can attach the account for recovering tax dues.

Who Can Open A PPF Account?

  • Individuals who are residents of India above the age of 18 years can open an account under the scheme.
  • Only one PPF account can be maintained by an Individual, except an account that is opened on behalf of a minor.

Who Cannot Open A PPF Account

  • Non-resident Indians (NRIs) cannot open a PPF account. However, account-holders who leave the country and obtain non-resident status after having opened a PPF account can continue to maintain their accounts until it matures i.e. until the end of the account’s 15-year term. NRIs are restricted from extending account tenures at maturity.
  • HUFs cannot open a PPF account, effective 2005. Those accounts opened by HUFs before May 13, 2005 can be continued until maturity without further extensions. An individual cannot open an account for an HUF (Hindu Undivided Family).
  • Foreigners cannot open a PPF account

Documents Required to Open PPF Account

For customers who have a relationship with ICICI Bank that is < 5 years

  • Form A
  • Passport size photograph
  • Copy of PAN card

For customers who have a relationship with ICICI Bank that is > 5 years

  • Form A
  • Passport size photograph
  • Copy of PAN card
  • Residence proof – Passport/ Electricity Bill

When Does PPF Account Matures

  • The Public Provident Fund Scheme is a statutory scheme of the Central Government of India.
  • The Scheme is for 15 years

Minimum and Maximum Amount Deposited

  • The minimum deposit is 500/- and maximum is Rs. 1,50,000/- in a financial year.
  • One deposit with a minimum amount of Rs.500/- is mandatory in each financial year

How many deposits are permitted in a year?

The deposit can be in lumpsum or in convenient installments, not more than 12 Installments in a year or two installments in a month subject to total deposit of Rs.1,50,000/- per FY.

Interest Rates for PPF Account

The Ministry of Finance, Government of India announces the rate of interest for PPF account every quarter. The current interest rate effective from 1 July 2017 is 7.8% Per Annum'(compounded annually). Interest will be paid on 31 March every year. Interest is calculated on the lowest balance between the close of the fifth day and the last day of every month.

Can I maintain more than one PPF account?

At any point of time, you are allowed to maintain only one PPF account in your name. You can also open and maintain a PPF account in the name of a minor child.

Is nomination facility available for PPF account?

Yes, nomination facility is available for PPF account. You have to fill a nomination form at the time of opening a PPF account to avoid difficulties for the nominee later on.

Tax Benefits Of Investments From PPF?

The deposit in a minor account is clubbed with the deposit of the account of the Guardian for the limit of Rs.1,50,000/-.

Partial Withdrawals From PPF

The PPF Scheme has very strict and specific rules to withdraw an amount from the Account. Normally, one can withdraw the full amount only after the maturity period of 15 years. But in any case, of emergency, you can withdraw some amount from the 7th financial year onwards to till 15th year. So, for withdrawing, there are some PPF Withdrawal rules which we need to follow. Mainly PPF is a long-term savings Account and also good end tax-free return investment. The PPF Account’s maturity period is 15 years. In case if you want to continue your PPF account after 15 years then you can extend the maturity period with a block of 5 years.

Premature Closure Of PPF Account

The premature withdrawal, however, comes with a penalty-you will get 1% less interest as applicable from time to time.

Earlier you were not allowed to prematurely close your PPF account. You had to complete 15 years to close it. So, even if you left the account inactive, you could only get the money after 15 years. Earlier you could only do partial withdrawal from the seventh financial year onwards. For partial withdrawals, earlier the rule was capped at 50% of the total balance at the end of the fourth year, counting back from the year of withdrawal or 50% of the total balance at the end of the year before the year of withdrawal, whichever is lower.
Inactivation and Reactivation of PPF Accounts

If a PPF account holder stop depositing the minimum amount of Rs. 500 for a year, the account will be inactive. To reactivate the account, the account holder need to pay Rs. 500 for every year contribution and Rs. 50 as penalty. For example, if you are failed to contribute two years you need to pay Rs.1000 as two years contribution and Rs.100 as a penalty for two years.

On Death of PPF account holder

Nomination facility is available for PPF account. In the event of the death of the PPF account holder, the balance amount in the PPF account will be paid even before the completion of 15 years, to the nominee or legal heir of the deceased person. The nominee of legal heir is not allowed to continue the PPF account by making fresh subscriptions to it.

Extension Of PPF Account For 15 Years:

(1) Closing of PPF account after the maturity or completion of 15 years– This option is known to all. We open an account, contribute till 15 years completion and finally close and withdraw the whole amount with interest. Even banks and post office share this option alone when you enquire about PPF feature. Therefore, I may say this as a universal option to the majority of PPF investors.

(2) Extend PPF account without further contribution–  This is the default option. Let us say your account matured on 1st April, 2016 and you neither closed the account nor applied to extend the account for a block of 5 years WITH CONTRIBUTION, then this option will be automatically activated. Do remember that the application to extend the account with a contribution for a block of 5 years must be submitted within one year from the date of maturity. Otherwise, this option will be selected automatically.

(3) Extension with contribution – The account holder can make deposits as earlier. In this case, withdrawal is restricted to a maximum of 60% of the balance at the beginning of each extended period is allowed.

Why should I invest in PPF account?
PPF account is the safest saving instrument available as it is backed by government of India. The amount invested and the interest earned has a sovereign guarantee and returns are tax free. The investments in PPF account up to Rs. 1, 50,000 qualify for deduction under Section 80C of the income tax act. Now you don’t have to stand in queues for PPF investments as in most of the banks you can now operate your PPF account online.


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