Public Provident Fund is a good saving investment which provides tax benefit and also gives good returns. Many people don’t know about PPF or have very little information. If someone asked me in 2009 about PPF I could not have any answer that time because I also didn’t had any information about PPF.
Public Provident Fund started by government for salaried and self-employed people to encourage the saving habit and by investing in PPF, people can build good corpus for their retirement. In this post I will list down some basic and important points about PPF.
Eligibility Criteria
Below are the criteria for opening the public provident fund account.
- Resident Indian Individuals.
- Resident Indian Individuals on behalf of minors.
- Only one account can be maintained by an individual excluding the account opened on behalf of minors.
- Only one parent can open the PPF account on behalf of minor child.
- Grand parents can also open the PPF account on behalf of grandchildren only in case of death of both the parents.
Transaction Limits
There are some restrictions on PPF account transactions. Below are the restrictions.
- Only 12 transactions are allowed in a financial year.
- Minimum 500 INR needs to be invested in a financial year.
- Maximum 1.5 lac INR can be invested including the amount invested in PPF account of minors, in a financial year.
Interest
Interest on PPF account credited at the end of financial year and it is compounded annually. Investment done from 1st to 5th of every month considered to interest calculation for that month i.e. if amount invested after 5th of any month will not be get any interest for that month, it will start getting interest from next month.
Income Tax Benefit
Public Provident Fund is a good tax saving investment.
- Invested amount is tax exempted under section 80C.
- On maturity total invested amount and total interest earned is tax free that means full amount is tax free.
Maturity and Extension
Public Provident Fund account gets matured after 15 years at the end of financial year. After maturity funds can be withdrawal once in a year. After maturity PPF account get interest every year. However PPF account can be extended to 5 years and at the end of every 5 year PPF account can be extended to further 5 years. In the event of extension PPF account got locked for 5 years.
Withdrawal and Loan
Full amount can be withdrawn only after maturity or by nominee in case of death of account holder. Partial withdrawal is allowed from 7th financial year subject to lower of 50% of the balance of customer credit at the end of fourth year immediately preceding the year of withdrawal or the amount at the end of preceding year. Only one withdrawal in a financial year is allowed.
Customer can avail the loan on PPF account from 3rd financial year to end of 6th financial year. The loan amount is restricted to 25% including the interest earned.
Opening of PPF account
Public Provident Fund account can be open in Post Office or any authorised bank. If you want to open PPF account in any authorised bank then first you have to open a saving account if you don’t have any than only you can open PPF account.
Transfer of PPF account
PPF account can be transferred from one institution to another institution. Transfer process should be started at the institution where the account is getting maintained currently. If you want to transfer PPF account to any authorised bank then first you have to open a saving account if you don’t have any than only you can transfer your PPF account.
PPF account service providers
Below is the list of Public Provident Fund account service providers.
- Indian Post Office
- State Bank of India
- State Bank of India Subsidiaries Banks
- ICICI Bank
- Bank of Baroda
- IDBI
- Central Bank of India
- Vijaya Bank
- Indian Overseas Bank
- Union Bank of India
- Allahabad bank
- Bank of India
Please note that not all the branches of a bank is authorised to maintain a PPF account.
Hope this post will answers some of your queries about PPF account
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