Complete guide on Public Provident Fund (PPF)
Complete guide on Public Provident Fund (PPF)
Public Provident Fund is one of the best retirement options apart from tax saving. PPF offers tax free interest. Though there is reduction of interest in recent time, still it is one of the best ways to accumulate tax free interest after 15 years. How to open PPF account in India? Where you can open a PPF account? In this article, I would provide complete details about PPF account, where to open, how to open and how you can get maximum interest by adopting simple tips. I would provide some of these PPF Account guidelines in this article.
Quick overview about PPF account
PPF stands for public provident fund and is a long term investment.
- It is a saving instrument which also provides income tax benefits in the form of tax savings. This scheme was launched by national savings institute of ministry of finance in 1968 with the aim of mobilizing small savings to return providing investment.
- PPF is a scheme to promote savings for even low income class and can be done with a deposit amount as small as Rs 500 to a maximum deposit of Rs 1.5 Lac per year. The deposits can be made either in lump sum or in a maximum of 12 installments every year.
- The annual rate of interest is announced by the government of India every year and the current rate of interest for PPF is 8.1% p.a. Compounded annually and the interest is paid in March every year end.
- Individuals who are residents of India can open PPF accounts.
- One individual can only have one PPF account.
- PPF is a very good investment scheme of government of India. Since it is a scheme of GOI it has low risk attached to it. It can be started with a small amount and interest earned under PPF are tax free.
Also Read: How to invest your money in India in 2016?
Where to open a PPF account in India?
Earlier PPF account guidelines where that one can open PPF at Post office only. However, one one can open either with a post office or a branch of the authorised bank, which is authorized for such purpose by the GOI under whose purview the scheme falls. Post office or such authorized banks act as agents for the GOI and thus accounts can be opened over there.
How to open PPF account in India?
The PPF form can be collected by visiting the post office or such authorized branch or form can also be downloaded online. The filled in form along with the prescribed documents has to be submitted to post office or bank and by depositing the initial deposit the PPF account will be opened with the respective post office or bank branch where such formalities are completed.
PPF account opening in the bank is much more convenient than in the post office because in post office fund transfer can be done through the saving bank account by ECS.
List of banks where PPF account can be opened
- State Bank of India
- State Bank of Travancore
- State Bank of Hyderabad
- State Bank of Mysore
- State Bank of Bikaner and Jaipur
- State Bank of Patiala
- Allahabad Bank
- Bank of Baroda
- Bank of India
- Bank of Maharashtra
- Canara Bank
- Central Bank of India
- Corporation Bank
- Dena Bank
- IDBI Bank
- Indian Overseas Bank
- Oriental Bank of Commerce
- Punjab National Bank
- Union Bank of India
- United Bank of India
- Andhra Bank
- Vijaya Bank
- Punjab and Sind Bank
- UCO Bank
- ICICI BANK
- AXIS BANK
What is the list of documents required to be submitted to open PPF account?
The documents required for PPF account are the basically the documents required for KYC. The person applying for the opening of the account needs to present to the bank or post office completely filled account opening form along with the below mentioned documents
1) A recent passport size photograph.
2) An identity proof with original copy for verification, such as PAN Card or Driving license.
3) An address proof with original copy for verification, such as electricity bill or Aadhar card etc.,
4) Account number of saving banks in the respective bank.
The list is not exhaustive. The bank or post office may ask for any document if need be.
Can we close the PPF account before 15 years of lock in period?
As per PPF Account guidelines, the account is opened for a minimum period of 15 years, which is the lock in period and may be further extended in a single or multiple block of 5 years each.
Can we extend PPF Account after 15 years of maturity period?
You can extend PPF account after 15 years with certain guidelines. If you want to extend your PPF account beyond 15 years and with subscription, you need to make the request seperately within 1 year from the maturity date. In case you have not given request to extend after maturity period of 5 years within 1 year from date of maturity, it is deemed to be extended for another 5 years block period with-out subscription option. In such case it would be extended as many number of block periods (5 years) as you want without intimating them, however no subscriptions can be made. This would be applicable for 5 years block period and it cannot be changed (with subscription to without subscription and vice versa).
Can we withdraw money from the PPF account?
The full amount cannot be withdrawn from the account before the completion of the lock in period i.e. 15 years under any condition. The withdrawal is not possible, even if the account is inactive during the 15 year period.
If the account holder needs money in between of 15 years, then scheme allows partial withdrawal from the account from 7th year only in the manner prescribed.
The amount, whichever is the lower of the two can be partially withdrawn from 7th year:
1) 50% of the total amount available in the account at the end of 4th year and the year is counted backward from the year of withdrawal.
2) 50% of the total balance available in the account at the end of the year before the year of withdrawal.
Such partial withdrawals can be made only once in the financial year.
After 15 years the amount so deposited can freely be withdrawn along with the interest accrued on the investment made and such interest earned is tax free under the income tax act and after such withdrawal the account stands closed.
Can NRI’s open PPF account in India?
NRI’s cannot open a PPF account in India.
What are the PPF account guidelines for individuals who opened PPF and became NRI’s later?
Individuals would have opened a PPF account and then later-on would have become NRI’s. In such cases, they can continue to hold the PPF account and make investments year on year. You can refer this article for specific guidelines for NRI’s on continuing PPF account in India.
How to get maximum tax free interest from the PPF account in India?
There are few tips which you can follow to get maximum tax free interest.
- Deposit Rs 1.5 Lakhs at the beginning of the year to get maximum tax free interest for the year apart from getting an income tax exemption u/s 80C.
- If you can deposit amount by the 5th of April, you would get complete interest in April as well for the remaining 11 months. If you deposit on the 6th of the month, you would get interest from subsequent month. Means 1 day can make a big difference for you.
- If your spouse is working and paying income tax, open PPF account in your spouse name too. The wife and Husband can deposit Rs 1.5 Lakhs per month each totaling to Rs 3 Lakhs per year. For 15 years, the total investment would be Rs 45 Lakhs (Rs 3 Lakhs x 15 years). You can get a tax free accumulation, wealth of over Rs 89 Lakhs which includes your investment. This can be used for retirement purpose or for child education or for child marriage.
- You can read more tips on how to get maximum interest on PPF at this link.
Can we transfer money online from SB account to PPF account?
Yes, you can transfer money from SB account to your PPF account. You can see this article about various ways where you can transfer money online to your PPF account.
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