The Public Provident Fund, introduced by the National Savings Institute, ensures secure savings through post offices and nationalised banks. With an interest rate of 7.10% p.a., as of FY 2024, it offers stable returns, aiding retirement planning for small investors.
This voluntary savings scheme aims to help regular investors who can only invest small deposit amounts. By regularly depositing a fixed sum, you benefit from compounding interest, ensuring financial stability in the long term. A minimum deposit of ₹500 per financial year is required to maintain the account.
Before opening a public provident fund account, here are some benefits and features you should be aware of:
Interest rate is fixed by the government
Tax benefit of up to ₹1.50 Lakhs per financial year u/s 80C of the Income Tax Act, 1961
Lumpsum and systematic investments are accepted
One deposit per financial year is mandatory to keep the account active
Partial withdrawal permitted from seventh year
Option to avail of a loan against public provident fund of up to 25% of the available balance
Loans can only be availed between the third and sixth year of account opening
Provided by banks and post offices
Lock-in period of 15 years applicable
Tenor can be extended in blocks of five years
Joint accounts are not permitted
Nominee facility is available
Requires minimal documents
Open account on behalf of minor in your family
Only one account permitted per person; unless the second account is for a minor
Eligibility |
Criteria |
Residential status |
Applicant must be an Indian Resident |
Age |
|
Type |
Documents |
Address Proof |
|
KYC |
|
Other documents |
|
You can open an account by visiting your nearest post office or through your bank's official website if they offer the PPF option. However, the online account opening process may differ across banks.
If you want to complete the account opening process at a post office, here are some steps you may be required to take:
Visit your nearest post office and request for the PPF account opening form
Fill out the form with the required KYC documents
Pay the initial deposit amount of ₹500
Once your account has been created, you will receive a PPF account passbook as an account opening confirmation.
Subscribers have the option to utilise the loan facility against their public provident fund accounts, offering personal loans against the available balance. It's ideal for those seeking unsecured, short-term loans at competitive rates.
The loan against PPF can be accessed from the third to the sixth financial year, post opening the account. Account holders can avail up to 25% of the account balance before the third financial year. Interest rates on these loans are 1% higher than the account's interest. Failure to repay within 36 months incurs a 6% higher interest rate.
FAQs
Will I earn interest on an inactive PPF account?
You must maintain an active account for 15 years to earn regular interest. For every inactive year, a ₹50 penalty will be charged. Additionally, a minimum deposit of ₹500 will have to be made for each inactive year.
What is the lock-in period for a public provident fund?
The public provident fund account has a minimum lock-in period of 15 years. However, you can partly withdraw funds after the seventh year of opening your account.
How many public provident fund accounts am I eligible to apply for?
You can apply for only one account in India, either at a bank or a post office. However, a second account can be opened by a parent or guardian for a minor.
How do I check the PPF account balance online?
You can check the public provident fund account balance online by logging into your net banking account. Here, you can check your details and balance amount.
What is the interest rate offered on PPF accounts?
As of FY 2024, the interest rate offered on public provident funds is 7.10% p.a.
Is the interest earned on a public provident fund account taxable?
No. The PPF is categorised as Exempt-Exempt-Exempt (EEE). This implies that the principal, interest, and maturity value are all tax-free.
Can I transfer my PPF account from one bank to another?
Yes. Account holders can shift their public provident fund account between different banks. They must begin the transfer process by submitting an application at their existing bank. Once completed, depending on the bank’s policies, they will be asked to furnish certain documents for the transfer to proceed.
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