PPF - Public Provident Fund Basics
The Public Provident Fund has been established by the Central Government of India. You can voluntarily decide to open one. You need not be a salaried individual, you could be a consultant, a freelancer or even working on a contract basis. You can also open this account if you are not earning.
Any individual can open a PPF account in any nationalised bank or its branches that handle PPF accounts. You can also open it at the head post office or certain select post offices.
The minimum amount to be deposited in this account is Rs 500 per year. The maximum amount you can deposit every year is Rs 70,000.
You invest in it and you get a deduction on your income. Besides, the interest you earn on it is tax-free. Since it is a scheme run by the Government of India, it is also totally safe. You can be sure no one is going to run away with your money.
Public Provident Fund (PPF) is the Best Tax saving as well as Investment Scheme sponsored by the government of India. PPF is the scheme for every kind of Investor.
Salient features of PPF scheme:
| Who Can Open | Any individual can open a PPF account, either for himself/herself or on behalf of a minor. Even if you are a part of a General Provident Fund (GPF) or Employees Provident Fund (EPF) scheme, you can subscribe to the PPF. |
| Investment Criteria | Min Amount :Rs. 500/- Max Amount Rs. 70,000/- The depositor can make a maximum 12 installments in a financial year. |
| Maturity period | The PPF account matures after 15 years but the contributions to be made are 16. This is because the 15 year period is calculated from the financial year following the the date on which the account is opened. Thus a PPF account matures on the first day of the 17th year. |
| Interest Rate | The current rate of interest is 8% per annum, compounded annually. The interest for the month is calculated on the minimum balance available in the account from 5th of a month to the last date of the month. |
| Nomination facility | Nomination facility is available. |
| Transferability | A PPF a/c are transferable among any nationalized bank and Post offices across India. A PPF account cannot be transferred from one person to another. |
| Withdrawal | The facility of first withdrawal can be done from 7th year of the account subject to a limit of 50% of the amount at credit preceding three year balance. Thereafter one Withdrawal in every year is permissible. |
| Loan Facility | 1. A depositor can avail of loan facility in the third financial year from the financial year in which the account was opened. 2. The loan can be taken up to 25% of the amount in the account at the end of the second year immediately preceding the year in which the loan is applied for. 3. The loan is repayable in lump sum or convenient installments. Where loan is repaid within 36 months, interest is charged at 1% and if it is not repaid within 36 months, the interest at the rate of 6% is charged on the outstanding balance. 4. A second loan can be obtained before the end of the 6th financial year if the first one is fully repaid. |
| Premature Encashment | Premature closure of a PPF Account is not permissible except in the case of death of the depositor. |
| Deduction u/s 80C | Deposits in PPF account qualify for deduction under section 80-C of Income Tax Act. At the same time Maturity proceeds is also completely tax exempt under section 10 of Income tax act. |
| Interest Taxability | The interest on deposits is totally tax exempt. |
| Other features | Deposits are exempt from wealth tax. The balance amount in PPF account is not subject to attachment under any order or decree of court in respect of any debt or liability. The account holder has an option to extend the PPF account for any period in a block of 5 years on each time. |
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