Public Provident Fund (PPF) is a statutory small savings scheme for the general public. The scheme was introduced by the Government of India under the PPF Act, 1968. Today, the PPF account is a popular saving scheme for individuals looking to earn guaranteed returns on their investments. Moreover, the PPF scheme is an EEE scheme wherein the investments made, returns earned and even the redemption amount enjoy tax benefits. This tax-saving nature and guaranteed returns offered to make the PPF scheme popular.
If you want to invest in the PPF scheme, you can open an account in a bank or a post office. To open an account, however, you should know the PPF deposit limit as well as the withdrawal limits of the scheme. So, let’s have a look at the PPF limits in details –
You can open a PPF Account with a minimum deposit of Rs.100. Once opened, you would have to keep on depositing at least once in a financial year in the PPF account till the account matures. A minimum deposit of Rs.500 should be made in one financial year. The PPF Account has a tenure of 15 years which can be further extended by another 5 years. During these 15 years, you would have to make at least one deposit of a minimum amount of Rs.500 to keep the account active.
While the minimum deposit is Rs.500, the PPF maximum deposit limit is Rs.1.5 lakhs in one financial year, i.e. between April and March. You cannot deposit more than Rs.1.5 lakhs in the PPF Account in any given financial year. The deposit frequency, however, is not limited. Earlier, the PPF account max deposit was twelve times in one financial year. However, the Government changed this rule in 2019. Now, you can deposit any number of times in one financial year. These multiple deposits can start from as low as Rs.50. So, while you can make deposits an unlimited number of times, the aggregate value of such deposits should not exceed Rs.1.5 lakhs which is the PPF maximum deposit limit.
If you extend the PPF tenure beyond 15 years, you can do so by submitting a request with the bank or post office within a year to maturity of the scheme. If the deposit tenure is extended, you would have to keep making the minimum deposit of Rs.500 every year to keep the account active. Moreover, during the extended duration of the scheme, the PPF account deposit limit would not change. A maximum deposit of Rs.1.5 lakhs per year would be allowed even during the extended deposit tenure.
Alternatively, you can choose not to extend the maturity duration of the scheme but remain invested in it even after maturity. If you do so, you would not have to make any deposits. The PPF account would continue earning interest on the accumulated balance.
PPF is a long term saving scheme. If you need funds within the tenure of the deposit, you have the following alternatives –
The amount that you deposit into the PPF account would be allowed as a deduction from your taxable income. You can claim a maximum deduction of Rs.1.5 lakhs under Section 80C of the Income Tax Act, 1961. This deduction is also the PPF maximum deposit limit. Thus, the maximum deposit which is allowed under the PPF scheme is also allowed as a deductible investment.
Withdrawals done from the PPF account are also treated as tax-free incomes. You should, however, withdraw up to the PPF withdrawal limit to claim tax exemption.
The PPF account, therefore, is an attractive saving scheme wherein you can start investing with as little as Rs.500. The account offers guaranteed interest income which is determined by the Government. Currently, for the quarter starting 1st October 2020, the PPF account is providing an interest rate of 7.1% per annum compounded annually. This interest earned and the amount that you deposit or withdraw from the scheme are all tax-free in your hands allowing you to accumulate a tax-efficient corpus for your financial goals.