Public Provident Fund (PPF) Account

PPF account is one the most efficient investment options for any individual because of safety of investment and guaranteed returns.

Public Provident Fund (PPF) Account

Public Provident Fund (PPF) Account

Safety with attractive returns


Public Provident Fund (PPF) was launched in India in 1968 by the central government of India. Even after so many years PPF account is one of the favorite investment avenue for investors.

The aim of this scheme is to mobilize small savings as investments which also return (Interest) on investment for the investor. Both the amount invested and interest earned on the scheme are guaranteed by the Govt. Thus for anybody looking for safe and definite investment PPF account is a very good option.

In this article let us explore various aspects of PPF accounts:


(1)What is a PPF account – Public Provident Fund (PPF) account is a long term savings cum investment scheme which offers attractive rate of interest on the amount invested. The safety of principal amount and rate of interest are guaranteed by the Govt. of India.


(2)What is the rate of Interest on PPF account – Rate of interest on amount invested in PPF account is decided by Govt. on quarterly basis. The normal rate of interest ranges from 7.50% to 9.00%. The interest is compounded annually and is paid in the month of March every year. The interest is calculated on the lowest balance between the close of fifth day and last day of every month. Therefore it is advisable to make contributions to PPF account before the fifth of every month to maximize returns.


(3)What is the deposit limit of PPF account PPF account can be opened with minimum Rs. 100/-. However to keep the account active minimum contribution of Rs. 500/- is required to be made every financial year. The maximum amount that can be invested in a PPF account in a financial year if Rs. 1.50 lakhs. There can be maximum 12 contributions in PPF account in a financial year.


(4)What is the tenure of PPF account – The maturity time of PPF account is minimum 15 years. If any individual wishes to extend the time limit of PPF account that is permitted in blocks of five years. During the extended time period there will be no compulsion of minimum contribution and on withdrawals. PPF account cannot be closed prematurely.


(5)What is the lock in period in PPF account As stated PPF account has maturity period of 15 years. On completion of 15 years period entire amount payable along with interest is paid to the investor unless there is a request for extension.

However partial withdrawal is permitted from the account from the 7 year.i.e after completion of 6th year. The amount that can be withdrawn partially is 50% of the amount available in the account at the close of 4th year (Or the preceding year in which is amount is withdrawn). Only 1 withdrawal is permitted in a  Financial  Year.


(6)Can loan against PPF account be availed - One can avail loan against PPF account from the third year to sixth year. Amount of loan will be the maximum of 25% of the balance in the account at the end of 2nd immediately preceding year. The loan is to be repaid in 24 months time and rate of interest on loan will be 2 percent above the prevailing rate of interest on PPF deposit.


(7)What are the tax benefits of PPF account – One of the most attractive features of PPF account is its tax treatment. The entire amount deposited in PPF account in any financial year is exempted from the income tax calculation under section 80(C) of the income tax. It is the only investment option where the interest earned on the investment is also tax free. Moreover the maturity amount of PPF is also tax free in the hands of investor. All these features make PPF account one of the most lucrative investment options.


(8)Who can open PPF account – Any resident individual aged above 18 years can open PPF account in his name. Only one account is permitted to be opened by an individual. PPF account for minor can be opened on behalf of the minor by either father or mother or legal guardian. There cannot be more than one PPF account in the name of any individual. On death of the account holder amount lying the PPF account transferred to nominee or legal heirs.


(9)Where to open PPF account PPF account can be opened with post office or commercial banks. Duly filled account opening form along with required KYC documents are to be submitted for opening this account.


(10)Summary - PPF account is one the most efficient investment options for any individual because of safety of investment and guaranteed returns. The effective rate of return from PPF account is also quite high as interest is totally exempted from Tax.