PPF – Public Provident Fund India

Public provident fund is a popular investment scheme among investors courtesy its multiple investor-friendly features and associated benefits. It is a long-term investment scheme popular among individuals who want to earn high but are also looking for stable returns. Safety of the principal amount is the prime target of individuals opening a PPF account.

Why open a PPF account?

Public provident fund scheme is ideal for individuals with a low risk appetite. Since this plan is mandated by the government, it is backed up with guaranteed returns to protect the financial needs of the masses in India. Further, invested funds in the PPF account are not market-linked.

Investors can also undertake the public provident fund regime to diversify their financial and investment portfolio. At times of downswing of the business cycle, PPF accounts can help with preserving your capital.

Features Of a PPF Account

The key characteristics of a public provident fund scheme can be listed as follows –

  • Investment tenure

PPF account has a lock-in period of 15 years on investment, before which funds cannot be withdrawn completely. An investor can choose to extend this tenure by 5 years after lock-in period is over if required.

  •  Principal amount

A minimum of Rs. 500 and a maximum of Rs. 1.5 Lakh can be invested in a provident fund scheme annually. This investment can be undertaken in a lumpsum or installment basis. However, an individual is eligible for only 12 instalments into a PPF account in one financial year. Investment in a PPF account has to be made every year to ensure that the account remains active.

  • Loan against investment

Public provident funds provide the benefit of availing loans against the investment amount. However, the loan will only be granted if it is taken at any time from the beginning of 3rd year till the end of the 6th year from the date of activation of the account.

Only 25% or less of the total amount available in the account can be claimed for this purpose. You will have to repay the loan in 36 months.

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Eligibility Criteria

Indian citizens residing in the country are eligible to open a PPF account in his/her name. Minors are also allowed to have a Public provident fund account in their name, provided it is operated by their parent.

Non-residential Indians are not permitted to open a new PPF account. However, any existing account in their name remains active till the completion of tenure. These accounts cannot be extended for 5 years – a benefit available to Indian residents.

Interest On a PPF Account

The interest payable on public provident fund scheme is determined by the Central Government of India. It aims to provide higher interest than regular accounts maintained by various commercial banks in the country.

Interest rates currently payable on such accounts stands at 7.1%, and is subject to quarterly updates at the discretion of the government.

How To Open a PPF Account

Both offline and online procedures are available for an individual provided he/she meets requisite parameters mentioned in the eligibility criteria. Activating PPF online can be done by visiting the portal of a chosen bank or post office.

The following documents have to be produced at the time of activation of a public provident fund account –

  1. KYC documents verifying the identity of an individual, such as Aadhaar, Voter ID, Driver’s License, etc.
  2. PAN card.
  3. Residential address proof.
  4. Form for nominee declaration.
  5. Passport-sized photograph.

Tax Benefits

Income tax exemptions are applicable on the principal amount invested in a PPF as account. The entire value of investment can be claimed for tax waiver under section 80C of the Income Tax Act of 1961. However, it should be kept in mind that the total principal that can be invested in one financial year cannot exceed Rs. 1.5 Lakh.

Also, this tax benefit is available for all 80 C investments cumulatively.

The total interest accrued on PPF investment is also exempt from any tax calculations.

Therefore, entire amount redeemed from a PPF account upon completion of maturity is not subject to taxation. This policy makes the public provident fund scheme attractive to many investors in India.


There are multiple clauses that an individual must adhere to in case he/she wants to withdraw funds from the PPF account.

Mandatory lock-in of 15 years is imposed on the principal amount invested in such plans. In case of emergencies related to specific end-uses, partial withdrawal can be made. However, this amount can only be extracted after the completion of 5 years of activation of the account.

Up to 50% of the total balance that stands at your credit at the end of the 4th financial year or at the end of the preceding year, whichever is lower, can be withdrawn.

Investors should note that funds invested in a PPF account cannot be liquidated before the completion of the maturity period. Individuals looking for long-term risk-free investment options providing stable yields can easily opt for this government-backed instrument.

Premature Closure

Premature closure for your PPF account is permitted but only under certain conditions. If you close your account prematurely, you will receive 1% lower interest than the prevailing rate. The first and foremost condition is that your PPF account should have completed at least 5 years from the date of account opening.

Once this condition is satisfied, the following are some of the situations in which a premature closure is allowed:

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  • If the account holder, phis/her parents, his/her dependent children, his/her spouse is suffering from a life-threatening disease. Medical reports and relevant documents need to be submitted.
  • If the account holder needs funds for higher education. Relevant documents such as fee receipts and admission confirmation will be required.
  • If the residency status changes. Documents required here are proof of a change in residency, a copy of passport, visa, income tax returns.

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