Public Provident Fund

Public Provident Fund (PPF) is the scheme of the central government formulated under the Public Provident Fund Act, 1968. It is a long-term small savings scheme which facilitates people to attain a security for retirement while saving tax by investing in the scheme. Interests are provided on such deposits.

Important Things to Remember

·         Only Indian residents can have a PPF account;

·         If an Indian resident becomes a NRI during his already activated PPF account, he may be allowed to continue it till its maturation;

·         The maturation period for a PPF account is 15 years while it can be extended again and again by a period of 5 years each time at the choice of the account holder;

·         Banks and post offices can open a PPF account;

·         A person can have only one PPF account in his name at a time;

·         Minimum yearly deposit is set at Rs 500 to open and maintain such account;

·         The maximum limit of yearly deposit (in a financial year) is Rs 1,50,000;

·         Deposits can be on a monthly basis or one time or in instalments;

·         The deposits are tax deductible under Sec. 80C of Income Tax Act;

·         The current rate of interest payable on PPF account is 7.9%.

Withdrawal Policy for PPF accounts

Ø  The entire money in the PPF account can be withdrawn on its maturity (the interest received is tax free);

Ø  One withdrawal per year is allowed after the completion of 5 full financial years;

Ø  The amount of withdrawal is limited to 50% of the total credit at the end of 4 years or the preceding financial year to the year in which the amount is to be withdrawn (whichever is minimum). The withdrawal amount is not repayable;

Ø  The limit of withdrawal in case the PPF account is more than 15 years old, is 60% of the amount at the end of the 15 years. The person has to apply through Form C;

Ø  Premature closure of PPF accounts may be allowed in case of serious ailments of the account holder or his spouse/parents or children and higher education of the account holder (the account holder has to forego 1% interest).

Loan from PPF account

ü  The customer can avail the loan facility from the third financial year to sixth financial year in respect to the PPF account concerned;

ü  He has to apply in Form D;

ü  The maximum amount of loan that can be availed is 25% of the credit at the end of the preceding financial year;

ü  The load has to be repaid within 36 months and also the interest at 2% of the principal amount.

Statutory Law References (Indian Kanoon)

Income Tax Act, 1961

Public Provident Fund Scheme, 1968

Public Provident Fund Act, 1968