PPF - Public Provident Fund Account

PPF offers fixed and guaranteed returns and has a long-term maturity period. This makes it is a suitable savings tool for financial goals that have a longer time horizon. Hence, PPF is a must for your retirement portfolio. You can invest up to Rs 1,50,000 per year in PPF and get tax exemption on that. The interest earned on the deposit is not taxed. The entire amount can be withdrawn on maturity and is tax-free in the hands of the subscriber. For self-employed people, who don’t get a salary and hence don’t enjoy the benefits of Employee Provident Fund, PPF is an extremely useful tax-saving instrument.

The interest rate on PPF is announced by the government every quarter. It is linked to the rates on government securities and changes accordingly. The interest on the PPF is calculated based on your balance in your account before the fifth of every month. So ideally, make your deposit before the fifth of the month to get maximum benefit. Any deposit made after that will not earn interest for that particular month.

The minimum amount that must be invested in a PPF account is Rs 500 and the maximum is Rs 1, 50,000 in a year. On maturity, the account can be extended for a 5-year period. There is no limit to the number of times the account can be extended. An individual can have only one PPF account in their name. However you can open a PPF account in your minor child’s name. When doing this please remember that the total investment in both PPF accounts should not exceed Rs 1,50,000 in a year. You can also invest in your PPF account online through internet banking!

The tenure of your Public Provident Fund is 15 years, after which you can extend the investment for a tenure of 5 years periodically. Therefore, you can extend the account after the 15-year tenure by another 5 years, i.e., 20 years, 25 years and so on.

Your PPF account will remain active as long as you continue to deposit a minimum amount of ₹500 in each financial year. In case you do not deposit this minimum amount, your account will be inactive, and there will be a penalty charge for each financial year that the account has been inactive. But if there is already some balance in your PPF account, it will continue accruing interest until maturity.

Yes, even if your PPF account is inactive, the existing amount in your account will continue earning interest until the scheme reaches maturity.

As per the PPF rules, you cannot have more than one PPF account in your name. However, you can increase the contribution amount each year to avail of better PPF benefits on maturity.

Yes, when you make a PPF contribution for yourself or on behalf of your child, contributions of up to ₹1.5 lakh will be eligible for tax deductions under Section 80C of the Income Tax Act when you file your tax returns. However, you can only claim the tax benefits as long as you are making the contributions.

At present, the PPF rules do not allow for an investment of more than ₹1.5 lakh for every financial year.

The interest is calculated on the lowest balance in the PPF account between the 5th and the last day of the month (as per the calendar month). This interest is credited to the account at the end of the financial year and will always be credited to the account even if it is inactive but has some balance amount.

No, you need not withdraw the entire amount when your PPF account reaches maturity at the end of 15 years. Instead, you can simply extend the tenure by 5 years at a time until you want to close the account.

A PPF investment does not continue once the account holder passes away. Instead, either your legal heir or an appointed nominee will be given the amount already deposited in the account as no interest will accrue on the account’s funds.

If the PPF account holder passes away, the legal heir can claim the PPF amount of up to ₹1 lakh without a succession certificate by filling and submitting Form G. They can find and download this form on the website of their bank or collect it at the post office where the PPF account was opened.

There is no limit on how many times you want to extend the tenure of your PPF account in periods of 5 years each. This can be done even without making any further contributions towards the investment as the existing amount will continue earning compound interest.