Know all about Public Provident Fund Scheme. Check all about PPF Benefits and Rules. Learn the essentials of PPF tax benefits. Check PPF calculator, PPF key features, documents required to open PPF account in the below sections.
What is PPF?
Public Provident Fund is also known as PPF and is a Long Term Debt Scheme of the Indian Government on which regular interest is paid. Public Provident Fund is a government backed, long term small savings scheme. PPF scheme is initially started by the Government to provide retirement security to self-employed peoples and workers in the unorganized sector as per the Provident Fund. But, nowadays it is considered as the best tax saving scheme across all sections of the individuals who needs to invest to save some tax. Anyone (either the Salaried Employee, Self-Employed or any other category) can invest in PPF scheme & can earn a tax-free return of the same which is usually more than the return offered by Banks on FD-Fixed Deposits.
Who are eligible for PPF Scheme Accounts?
- An assessee who is residents of India can open an account under the PPF scheme.
- Only one PPF account can be maintained by the person, except an account that is opened behalf of a minor. Hence, Public Provident Fund account can also be opened by either parent or under the name of a child. But, each is eligible for only one account under the name of the holder. In a family, Mother & Father both cannot open PPF accounts on behalf of the same minor. Hence, in case a couple has two children, they can be maximum open four accounts i.e. two in their accounts and two in the name of their children under the guardianship of either of the parent.
Who can NOT open Public Provident Fund account?
- Non-residents are NOT eligible to subscribe PPF account. However, if anyone opens a Public Provident Fund Account while he/she is a Resident of India but subsequently becomes an NRI, she/he shall be allowed to continue investing in assessee’s account.
- The resident who becomes a Non-resident during the tenure prescribed under PPF Scheme may continue to subscribe to the PPF fund until its maturity on a non-repatriation basis. (Funds can be transferred via CASH or NRO Account. Funds can be transferred via Internet banking also). However, such an account will not be eligible for an extension of five years at the time of maturity.
- The assessee cannot open a joint account with another individual. The Public provident Fund account can only be opened in one person’s name. The taxpayers are free to nominate one or more persons. On the death of the account holder, nominees cannot keep the account going by making contributions. If there are no nominees for the taxpayer, the legal heirs of the assessee get the money. The Assessee can open one account for himself and others for their child/ children. But, on assessee’s death, their children cannot make any additional contributions.
How to open Public Provident Fund-PPF Account?
Public Provident Fund-PPF accounts can be opened either by visiting a bank branch or the head post office or online via internet banking. A PPF account can be opened for Rs.100/- but the total deposit for the year should be a minimum of Rs. 500/-.
- At a Head Post office or Nationalised bank
Accounts can be opened by visiting a head post office or branch of a bank that has been authorized for this purpose. The required PPF forms can be obtained, filled in and submitted along with the required documents. An initial deposit (in the form of cash) has to be made to open the PPF account. Authorized Banks and post offices act as agents of the government under whose purview the PPF scheme falls.
- Online Mode
PPF Accounts can also be opened online by visiting an authorized bank’s official website or through third-party services providers’ sites that provide such services. Opening accounts online with an authorized bank is primarily subject to the terms and conditions laid down by the bank. By opening the Public Provident Fund account online, the assessee can save time, effort & travel costs. Many banks offer additional provisions such as linking savings accounts, viewing online account statements & online fund transfers.
Traditionally, accounts were opened basically through post offices but with online banking obtaining popularity, more investors are selecting to open accounts with banks which try to customers with value added services such as instant account balances and mobile updates.
PPF Scheme Key Features
The key features to note about Public Provident Fund accounts are listed below.
- PPF Interest rates: Interest rates are announced by the central government regularly, usually annually. PPF Interest earned is compounded yearly. (The current PPF Interest rate is fixed at 8.10% per annum from onwards 01 April 2016 – 30th June 2016).
- Tenure: Public Provident Fund scheme is a 15 years plan. Hence, as per standard rules, PPF account gets matured after the completion of 15 years from the end of the year. Although, on maturity this 15 years period can be extended any no. of times for a block of 5 years. PPF deposit can be made by submitting Form H within one year from the date of maturity.
- Initial PPF investment: Rs.100/- to open the PPF account.
- Annual Deposit Amount: Rs.500/- to Rs.1.5 lakhs per year.
- Deposit frequency: A PPF deposit has to be made every year, for 15 years, to keep the PPF account active.
- Deposit modes: The PPF amount can be deposited in various ways such as cash, cheque, PO, Demand Draft, online funds transfer; up to 12 installments or as a one-time deposit.
- PPF Withdrawal: Partial premature withdrawals can be made every year from year 7. PPF withdrawals are subject to conditions. Complete PPF withdrawal of funds can be made only at the time of maturity.
- Tax advantages: Interests are tax-free and deposited amounts are tax deductible Under Section 80C of the Income Tax Act, 1961. PPF Withdrawals are exempt from Wealth tax.
- Nomination: The Nominations are allowed on opening the account.
- Fund transfer: PPF Funds or accounts cannot be transferred between individual but can be easily transferred between post offices or bank branches for free.
- Loan facility: Loans from PPF account can be availed against funds held in the PPF account from year 3 to year 6.
- Renewal: Extension of the PPF scheme or Renewal is allowed, for an extra five years at a time.
- Joint accounts: The joint accounts are Not allowed under PPF scheme.
Benefits of Investing in a PPF Scheme
Let’s have a look at the few of the key advantages of Public Provident Fund accounts are stated below.
- Attractive Long Term Investments: With a PPF deposit period of 15 years & a lock-in period of 7 years, these PPF accounts serve long-term investment goals. With PPF interest rate compounded per annum, effective returns tend to be more attractive Bank Fixed Deposits.
- Retirement planning: Compounded, Long-tenures, tax-free returns and capital protection make this PPF Account as an ideal option for building a retirement corpus.
- Tax-free exemption: tax-exempt interest & withdrawals and tax-deductible investments.
- Low-risk: Since PPF Scheme is a government backed scheme, there is the low risk of default.
- Easily Accessible: Public Provident Fund accounts can be opened at nationalized, post offices or public banks & select private banks, all of which have the wide reach. Accounts can be opened online as well.
- No attachment: Public Provident Funds can’t be attached under court order or laid claim to by creditors.
PPF Interest Rate
The payable PPF Interest rate is now fixed on the quarterly basis from April 1, 2016, onwards. The Interest rates have fluctuated a lot during last decade and are likely to remain stable or even go down marginally in the years to come. The details of the rate of interest paid during last few years is given below:
|S.no||Period||Interest Rate (p.a)|
|1.||01 December 2011 to 31 March 2012||8.60%|
|2.||01 April 2012 to 31st March 2013||8.80%|
|3.||01 April 2013 to 31st March 2014||8.70%|
|4.||01 April 2014 to 31st March 2015||8.70%|
|5.||01 April 2015 to 31st March 2016||8.70%|
|6.||01 April 2016 to 30th June 2016||8.10%|
Thus, the current PPF interest rate is 8.10% (01 April 2016 onwards), and would be 8.70% (upto 01 April 2015 to 31st March 2016).
The assessee should remember that interest on Public Provident Fund is calculated on the minimum balance in his account between the 5th and the last day of every month. Therefore, in case you wish to deposit large amount at any time of the year, ensure that you invest (i.e. PPF account is credited with the investment amount) on or before the 5th of that month so that assessee can earn interest for the entire month.
Documents needed to open PPF Account
Let us check the Documents required opening a PPF account which is listed below. These required documents include identity proof, signature proof, and residential proof. These documents commonly include the latest version of a Individuals.
- Identity Proof such as Passport, Aadhar Card, PAN Card, Driving License, Voter’s ID, a letter from Employer or organization, Utility Bill, Rental or Lease Agreement, Bank Account Statements, Signed Cheque, Ration Card.
Photograph of the Assessee.
- The PPF account opening form, along with nomination form if nominees are being named.
- The list provided here is not an exhaustive list. The authorized Banks may request additional documents if required. If in the case of minors, age proof will be needed i.e. the birth certificate of the highest or Study certificate from school.
Provident Fund Calculator – PPF Calculator
A Public Provident Fund-PPF calculator is a financial tool offered for free on online. PPF calculator is usually featured on a post office’s/bank’s website. This calculator is useful for assessee investing under the PPF scheme.
- PPF calculator helps account holders to calculate interest on PPF deposits and maturity amounts. This calculator also aids the investment needed for certain desired returns. Provident fund calculator conveys results in a user-friendly manner often in the form of charts which clearly indicates how much amount has accrued in the account as principal, and how much amount has accrued as interest, and how much amount to expect on maturity.
- Provident Fund calculator assist assessee in ascertaining how much amount they stand to gain if they select to extend their maturity period.
- In the case of PPF loans, withdrawals, loan repayments, the PPF calculator is a handy tool to form quick calculations to arrive at the latest account balances after accounting for all debts.
- Given that PPF investments can be made either in a lump sum, calculations can get tedious & confusing when the latter is chosen. Also, considering PPF interest rates are subject to change every year, balances will have to be carefully calculated to account for the rise or falling rates. Deposit calculators can help with this.
- There are also some of the limitations to borrowing and withdrawing from a PPF account. PPF calculators help taxpayer to determine how much amount they can borrow or withdraw based on these constraints.
Public Provident Fund-PPF Forms
Let us check the various forms required for PPF accounts. Public Provident Fund forms are ranges from A to H, each of them is furnished for a particular purpose.
PPF Form A
Form A is the application used to open a Public Provident Form Account. Form A is the form furnished to users who are opening a new PPF account. This Form will need key particulars of the assessee such as the name of the account holder, address, PAN details and signature to be filled in. The amount being deposited in PPF account will also have to be specified in the Form A. For minors, the information such as the minor’s name (name of the account holder), guardian’s name & relationship with the account holder will be required to furnished in the form. If the PPF account is being opened by an agent (third party), the agent’s name will have to be filled in.
PPF Form B
Form B is a Challan for deposit of money into Government account. Form B is used to pay money into the PPF account. These pay-ins or deposits may be investments, repayments for a loan taken against the PPF account to reactivate an inactive account. Loans under PPF account can be availed from year 3 to year 6, counted from the year of account opening. The deposit amounts can be deposited via cash, cheque, PO, Demand Draft or Internet banking.
PPF Form C
Form C is an application form for withdrawals under the PPF Scheme. Form C is used to make partial withdrawals from a PPF account, certain sums of the amount can be withdrawn from the account from the 7th year of opening the PPF account . Form C is an application to withdraw such amounts under PPF Scheme.
PPF Form D
Form D is an Application for to take the loan under the PPF Scheme. To claim a loan against a PPF account, Account holders can utilize the loan facility furnished under the scheme from year 3 to year 6 of an active account. Details to be specified are the Public Provident Fund a/c number, the amount being borrowed and an undertaking that the amount will be repaid with interest within three years as per the rules.
PPF Form E
Form E is an application to make or add a nominee to a PPF account. More than one individual can be nominated for a single Public Provident Fund account. The names of this person (new nominee), along with their residential addresses and relation to the applicant has to be specified in the Form. If in case more than one candidate is stated, the percentage of funds that can be claimed by each (nominee) will also have to have to be specified. Nominations cannot be made for minors'( whose age is below 18 years) PPF accounts.
PPF Form F
Form F is an application to make alterations or cancellation of nomination information under PPF Scheme. Form F to be used to cancel or change nominees for a particular PPF account. The assessee will have to specify when the nominee being canceled or replaced or altered was named so. The Nominees can be added, withdrawn at any time during the PPF account tenure. The percentage allocated to each nominee in the PPF account can also be changed.
PPF Form G
Form G is an application for withdrawals by legal heirs or nominees under PPF Scheme. To claim funds in a Public Provident Fund account by a nominee or legal heir Form G is used. If in case account holder of the PPF account dies, the legal heirs or nominee can claim the amount in his Provident Account.
PPF Form H
Form H is the application for the continuance of account under PPF Scheme beyond 15 years. To extend the maturity period of a PPF account, Form H is used. The standard tenure for a Public Provident Fund account is 15 years after which the account holder can withdraw funds held therein, completely and freely. But, in case if assessee wishes to extend the term of the account beyond 15 years, then he can do so for a further five years by submitting this form. The account number and date of account opening will have to be specified in the PPF Form H.
Download PPF Forms
|1.||Application for opening a PPF Account.||Form A|
|2.||Challan for deposit of money into Govt account.||Form B|
|3.||Application form for withdrawals under the PPF Scheme.||Form C|
|4.||Application for a loan under the PPF Scheme.||Form D|
|5.||Nomination under the PPF Scheme.||Form E|
|6.||To make the cancellation of nomination information under PPF Scheme.||Form F|
|7.||Application for withdrawals by nominees/ legal heirs under PPF Scheme.||Form G|
|8.||Application for the continuance of account under PPF Scheme beyond 15 years.||Form H|
What are Minimum and Maximum PPF Deposits?
The minimum deposit required being made every year is Rs.500/-. The maximum deposit that an individual can make in a year is currently Rs.1.5 lakhs.
In case account holder fail to make an annual deposit, in any year, will lead to inactivation of the account. PPF Deposits can be made in a lump sum that is. The entire amount to be invested can be paid into the account at one time, or it can be spread over 12 installments in a year or spread over up to 2 payments a month.