The public awareness regarding the versatility that PPF offers is somewhat vague and most do not know how easily accessible this instrument can be. Additionally, it offers the benefit of helping your investment grow (better than a savings account, fixed deposits, and infrastructure bonds) with the same ease of access that more modern financial instruments offer.
So, we thought we’d take the time to lay it all out for you. Here you’ll get to know how PPF works, what kind of benefit it offers, the procedure for withdrawal, and the banks that can offer this facility.
In this article
- List of Banks Offering PPF Account
- 7 Things You Need to Know About PPF
- #1 What is PPF?
- #2 What are the features of PPF?
- #3 What Is PPF Interest Rate?
- #4 What Kind of Tax Benefits do PPF Offer?
- #5 Eligibility and Documents Required
- #6 PPF Withdrawal Policy
- #7 How to Withdraw from PPF?
List of Banks Offering PPF Account
Here’s a list of all the banks that offer PPF facilities. The ones that offer online PPF facility have been marked in bold and have “online facility available” written beside them.
If you had your PPF account with any of the five associate banks of SBI (State Bank of Patiala, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Travancore, and State Bank of Mysore), then you will be able to access them at your nearest SBI account.
- Allahabad Bank (online facility available)
- Axis Bank (online facility available)
- Bank of Baroda
- Bank of India (online facility available)
- Bank of Maharashtra
- Canara Bank (online facility available)
- Central Bank of India (online facility available)
- Corporation Bank
- Dena Bank
- HDFC Bank (online facility available)
- ICICI Bank (online facility available)
- IDBI (online facility available)
- Indian Bank
- Indian Overseas Bank
- Oriental Bank of Commerce
- Punjab National Bank
- State Bank of India (online facility available)
- Syndicate Bank
- Union Bank of India
- United Bank of India
- Vijaya Bank
7 Things You Need to Know About PPF
#1 What is PPF?
PPF is an abbreviated form of Public Provident Fund.
It was instituted in 1968 by National Savings Institute, an arm of the Ministry of Finance. The instrument was floated to help mobilize small investment across the country as well as providing a tax benefit for the investment amount.
Till date, it is one of the most flexible investment instruments in the country.
It’s best used as a long-term instrument which can help build your retirement fund or finance the education of your kids or help build your dream home.
One of the key features of PPF is the safety and security it offers.
It is a debt-based instrument which is why it provides guaranteed returns, thus, ensuring that your investment is always safe irrespective of the market conditions.
#2 What are the features of PPF?
Let’s take a look at the various features and benefits that PPF offers.
The minimum yearly deposit for PPF is INR 500, while the maximum deposit amount is capped at INR 1,50,000.
This is the maximum allowable amount that one can deposit in their PPF account, including accounts where they are guardians.
A parent can open an account in their child’s name (with the child as the beneficiary) and act as the guardian of the account. Any investments or deposits in excess of INR 1,50,000 will not earn any interest.
The amount can be deposited in monthly installments or as a lump sum, depending upon your convenience.
Public Provident Fund has a minimum tenure of 15 years.
As mentioned above, this is a long-term instrument and while the scheme allows access to funds during the tenure of investment, it does not mature until it’s at least 15 years.
However, if you’re looking to extend the tenure, you can do that in blocks of 5 years. For example, if your current PPF expires in 2020, you can choose to extend your PPF up to 2025.
Mode of Deposit
Your investment can be deposited into your PPF account via cash, cheque, demand draft, or fund transfer (via internet banking).
Once your fund has reached maturity, you will have a few options. Depending upon your investment goals, you can either:
a. Decide to withdraw the amount,
b. Extend the PPF tenure with no added contribution – This option acts as default in case no other option has been exercised by the subscriber.
c. Extend the PPF with a new contribution – This option can be chosen if you want to continue your investment in the PPF.
Defaults and Renewal
According to PPF rules, if in any year, an amount of less than INR 500 is invested, then the account is deactivated automatically. In order to reactivate the account, the subscriber/investor would need to pay a fine of INR 50 and the minimum amount (INR 500) for each deactivated year.
In case the account holder has passed away, then the amount in the account will be paid to the nominee or legal heir of the account holder.
If the account balance is more than INR 1,50,000, then the nominee will have to prove his/her identity to stake the claim. However, under no circumstance can the nominee continue the account of the deceased.
Previously, there used to be no facility for premature closure of the account.
But, in 2016, the Public Provident Fund (Amendment) Scheme added the facility. Under the new rules, premature closure is allowed, but only after 5 years and if the amount needs to be withdrawn for medical reasons or to finance higher education.
The closure comes with a penalty of 1% on the interest rate.
Transfer of Account
The account can be transferred to another bank of your choice by following a few simple and easy steps. It can also be transferred to a post office of your choice.
First, you would need to visit the current bank or post office where your PPF account exists and fill out an account transfer form.
Once that’s done, the bank will then forward your documents and a cheque or demand draft of the outstanding amount of your balance to the new bank.
Once your new bank receives the document, you will be asked to submit an account opening form along with the old PPF passbook you held at the previous bank.
After a few weeks, you can check with your new bank to see if the account has been successfully transferred. The same can also be achieved via net banking.
You can nominate a beneficiary for your account, who will be granted access to the account balance in your absence. The number of nominees can be multiple and the amount accessible to each can be predetermined by you.
In case you have an immediate requirement of funds, you can avail a loan based on your PPF account.
The loan paid out is capped at 25% of the balance at the end of two years.
The repayment tenure for the loan is 36 months, while the interest rate levied will be 2% more than the prevailing interest rate in PPF.
This facility can only be utilized between the 3rd and the 5th financial year.
#3 What Is PPF Interest Rate?
As of January 2018, the PPF interest rate is 7.6%.
Previously, during 2014-16, the rate offered was 8.7% while April 2017-December 2017 saw an interest rate of 7.8% being offered to the subscribers.
#4 What Kind of Tax Benefits do PPF Offer?
Subscribers can avail tax savings benefit under Section 80(C) of the Income Tax Act.
The amount in the PPF balance is divided into two parts – the principal and the interest.
The principal represents the amount invested by you and the interest is the return on your principal. The tax benefits on both the amounts are capped at INR 1,50,000 for a single financial year.
All You Need to Know About Section 80C.
#5 Eligibility and Documents Required
Any person who is a resident of India is eligible to invest in the PPF.
They would need to submit a copy of their PAN Card, Aadhar Card, residential proof, and a passport size photo of the subscriber along with a duly filled Form A.
#6 PPF Withdrawal Policy
While the PPF only allows account closure in case of maturity or urgency, you can withdraw amounts from your PPF subject to certain rules.
Partial withdrawals can be started after completing 6 consecutive years of investment, but the amount withdrawn is limited to 50% of the account balance as of the 4th year of investment.
Additionally, you can make only one withdrawal in a financial year.
#7 How to Withdraw from PPF?
In order to withdraw the amount in your account, you would need to fill out Form C and submit it to the respective branch of bank or post office bearing your PPF account. The form is divided into 3 sections – declaration, office use, and bank details.
In the declaration section, you are required to provide the PPF account number, the amount you want to withdraw, and the number of years passed since the account was first opened.
The office use section will be filled by the bank where you are submitting the form and should not be filled unless the executive at the bank or post office asks you to.
Lastly, the bank details section will require you to provide the details of the account where you would want to have the PPF account balance credited.
It will also offer you a choice of options with which you can withdraw – online transfer, cheque, or demand draft.
Along with the form, you will need to attach a copy of the PPF passbook.
Hope this information serves to help you understand the flexibility and versatility of the options offered by the Public Provident Fund.
While its interest varies, it remains one of the most secure investment and tax savings options due to its debt-based nature.
Additionally, it has great ease of access due to the wide network of banks and Government post offices that support the PPF scheme.
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.