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The Public Provident Fund is a savings-cum-tax-saving instrument in India, introduced by the National Savings Institute of the Ministry of Finance in 1968. The aim of the scheme is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits. The scheme is fully guaranteed by the Central Government. Balance in PPF account is not subject to attachment under any order or decree of court. However, Income Tax & other Government authorities can attach the account for recovering tax dues.
How to open a PPF account?
A PPF account can be opened with either a Post Office or with any nationalized banks like the State Bank of India and Punjab National Bank. These days, even certain private banks like ICICI, HDFC and Axis Bank among others are authorized to provide this facility. Submit the duly filled application form along with the required documents i.e. the KYC documents like identity proof, address proof, and signature proof. And then deposit a prescribed amount towards the opening of the account.
Features of PPF
The PPF has a minimum tenure of 15 years, which can be extended in blocks of 5 years as per your wish.
PPF allows a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh for each financial year. Investments can be made in lump sum or in a maximum of 12 installments.
The account can be opened with just Rs 100. Annual investments above Rs 1.5 lakh will not earn interest and will not be eligible for tax saving.
Deposit into a PPF account has to be made at least once every year for 15 years.
Mode of deposit:
The deposit into a PPF account can be made either by way of cash, cheque, Demand Draft or online fund transfer.
A PPF account holder can designate a nominee for his account either at the time of opening the account or subsequently too
A PPF account can be held only in the name of one individual. Opening an account in joint names is not allowed
Since PPF is backed by the Indian government, it offers guaranteed, risk-free returns as well as completes capital protection. The element of risk involved in holding a PPF account is minimal.
Who can invest in PPF?
Any Indian citizen can invest in PPF. One citizen can have only one PPF account unless the second account is in the name of a minor. NRIs and HUFs are not eligible to open a PPF account.
Loan against PPF:
You can take a loan against your PPF account between the 3rd and 5th year. The loan amount can be a maximum of 25% of the 2nd year immediately preceding the loan application year. A second loan can be taken before the 6th year if the first loan is repaid fully.
What is the interest rate on PPF?
The current interest rate is 7.6% that is compounded annually. The Finance Ministry set the interest rate every year, which is paid on 31st March. The interest is calculated on the lowest balance between the close of the fifth day and last day or every month.
While the minimum annual amount required to keep the account active is Rs 500, the maximum amount that can be deposited in a financial year is Rs 1.5 lakh. One can open a PPF account in one’s own name or on behalf of a minor of whom he is the guardian. This is the combined limit of self and minor account.
If contributions are in excess of Rs 1.5 lakh in a year, the excess deposits will be treated as irregular and will neither carry any interest nor will this excess amount be eligible for tax benefit under Section 80C. This excess amount will be refunded to the subscriber without any interest.
Procedure for withdrawal from PPF
In case you wish to partially or completely withdraw the balance lying in your PPF account, you can do so by submitting an application for withdrawal in Form C with the concerned branch of the bank where your PPF account lies.This form has 3 sections:
It is also mandatory to enclose a copy of the PPF passbook along with this application.