Key Features of PPF

Interest Rate

Public Provident Fund (PPF) interest rates in India are currently 7.1% annually, compounded annually. This rate is valid from 1 January 2025 to 31 March 2025, and it could change in response to announcements by the Indian government. Deposits made after the fifth day of the month will not earn interest for that month since interest is computed on the lowest balance between the end of the month and the closing of the fifth day.

Investment Limits

You can open a Public Provident Fund (PPF) with as little as ₹100, but you must deposit at least ₹500 annually to keep the account operational. A PPF account can only have a maximum annual deposit of ₹1,50,000. You can deposit money as many times as you like, as long as you don't go over this amount. A minor's PPF account and your account have a combined annual limit of ₹1,50,000. Section 80C of the Income Tax Act also provides tax benefits for investments up to ₹1,50,000. Because of this, PPF is a well-liked option for tax planning and long-term savings.

Tenure

The minimum term for a PPF account is 15 years. You can extend it in 5-year increments after this time. You can take out some of your money after the fifth year for certain purposes, but you cannot take out all of your money during the first 15 years. You have the option to prolong the account once the 15 years are up, either with or without additional funds. Up to 60% of the remaining amount may be withdrawn over the following five years if you choose to extend with contributions. You can take out one withdrawal per year, and the account continues to earn interest if you don't make any more deposits. The account automatically extends without additional contributions if you do nothing, allowing withdrawals while still earning interest. PPF is a strong long-term savings option with assured returns and tax benefits because of its flexibility.

Eligibility

You must be a resident Indian citizen to open a PPF account; there is no age limit for opening a PPF account, so it is appropriate for long-term financial goals; parents or guardians can open an account for a minor child, and the deposits are combined with the guardian's account for tax purposes; you can only have one PPF account in your name unless you have opened another for a minor; and you need to provide identification, proof of address, and a recent photo. Non-resident Indians (NRIs) are not allowed to open new accounts, but if you become an NRI after opening one, you can keep making deposits until it matures.

Tax Benefits

A Public Provident Fund (PPF) investment has many tax advantages. Under Section 80C, you can deduct up to ₹1.5 lakh in annual contributions to a PPF account from your taxable income. Furthermore, both the amount you receive at maturity and the interest you earn on your PPF investment are entirely tax-free. This implies that neither the interest nor the total amount you receive back is subject to income tax. PPF is classified as an "EEE" investment, which means that your initial investment, interest, and withdrawals are all tax-free. PPF is a fantastic approach to lower your tax liability and save money overall.

Loan Facility

After three to six years from the date of account opening, you are eligible to take out a loan from your PPF account. At the end of the second year, the loan amount can only be up to 25% of the remaining balance. For instance, you can borrow up to ₹25,000 if you now have ₹100,000 in your account. You have three years to pay back the loan, and once you have done so, you will also have to pay a nominal interest rate of 1% annually. This loan is a quick and simple solution to cover urgent financial demands without affecting your long-term resources because it doesn't involve any collateral or credit checks.

Partial Withdrawals

After seven years from the end of the fiscal year in which you made your initial contribution, you can take out partial withdrawals from your PPF account. 50% of the balance is the withdrawal cap, which is determined by taking the lowest of two figures: 50% of the balance at the end of the year before withdrawal or 50% of the balance at the end of the fourth year. You must complete Form C and send it along with your most recent passbook to withdraw. Only one partial withdrawal is permitted annually. The good news is that you don't have to worry about paying income tax on the amount you remove because these withdrawals are tax-free.

Nomination

If a PPF account holder dies, they may nominate beneficiaries to get their money. This can be accomplished by completing a nomination form later on or when the account is opened. You can designate how much each of the four nominees should get. If the nominee is underage, you can choose a guardian to oversee the money until the nominee is an adult. Nomination is crucial because it guarantees that your funds are distributed to the appropriate parties without a court ruling, preventing legal issues and giving your loved ones financial stability.

Ways to open PPF Account

Online Process

Log in to internet banking: Access your internet banking account with a participating bank (e.g., HDFC, SBI, Axis)

Navigate to the PPF section: Click on the 'Public Provident Fund' or 'PPF Accounts' option.

Fill out the application form: Enter required details, including personal information and investment amount.

Verify details: Confirm all entered information.

Set standing instructions (optional): Automate deposits from your savings account.

Submit Application: An OTP will be sent for verification; enter it to confirm.

Account Creation: Your PPF account will be created, and an account number will be displayed.

Offline Process

Visit bank or post office: Go to a designated bank branch or post office.

Collect Application Form: Obtain the PPF account opening form.

Fill out the Application Form: Enter required details.

Gather Documents: ID proof (e.g., Aadhaar, passport). Address proof (e.g., voter ID, utility bills). Two passport-sized photographs. Pay-in slip or check for initial deposit.

Submit Documents: Hand over the completed form and documents to the bank or post office representative.

Initial Deposit: Make the minimum deposit of ₹500.

Account Creation: Once processed, you will receive a PPF passbook.