What is PPF ?

PPF stands for Public Provident Fund which is backed by Indian Government. PPF is the most common investment for a number of decades. Its features like guaranteed return, tax exemption under section 80C as well as tax free interest makes it the most popular investment among the risk adverse investors. Any person whether employed or self employed can invest in the scheme.
Another benefit in PPF is that the amount in PPF account cannot be attached under a court order for recovery of a loan or liability.

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 1. Tax Benefits 
1.                                       Tax exemption under section 80C up to a limit of Rs. 1,50,000.
2.                                       Interest is tax free. It is not taxable at the time of accrual nor at the time of receipt. Premature withdrawal is also exempt from tax.
3.                                       Tax exemption under section 80C can be availed by parents in case of deposits by minor. Total amount deposited by parent along with minor cannot exceed Rs. 1,50,000 thus total deduction under section 80C cannot exceed Rs. 1,50,000 in any case.

2. Interest

Interest rate is decreased to 8.10% for the year 2016-17.
Interest is compounded annually and credited at the end of every financial year. If amount is deposited on or before 5th of the month then interest is credited for the whole month otherwise interest will not be given for the whole month. Interest is not calculated day wise but calculated monthly.
PPF Interest Rate Chart
Financial Year
PPF Interest Rate
2000-01
 11%
2001-02
 9.5%
2002-03
 9%
2003-04
 8%
2004-05
 8%
2005-06
 8%
2006-07
 8%
2007-08
 8%
2008-09
 8%
2009-10
 8%
2010-11
 8%
2011-12
 8.6%
2012-13
 8.8%
2013-14
 8.7%
2014-15
 8.7%
2015-16
 8.7%
2016-17
 8.1%

3. Opening PPF A/c 

1.                                       Can be open in post offices or any authorised banks.
2.                                       Can be open by minors.
3.                                       Can’t be opened in joint names.
4.                                       Can’t be opened by HUF, NRI. However, if someone opens a PPF Account while he is a Resident of India but subsequently becomes a NRI, he shall be allowed to continue investing in his account.
5.                                       Nominee can be appointed by the account holder. After death of account holder, nominee cannot continue the account.
6.                                       The date of realization of cheque in Government account shall be date of opening of account.
7.                                       A Power of attorney holder can neither open or operate a PPF account.
8.                                       The grand father/mother cannot open a PPF account on behalf of their minor grand son/daughter.
9.                                       A person can open only one PPF account.
        Document required for opening a PPF account
        Account opening form – Form A

4. Depositing Amount

1.                       Maximum amount that can be deposited in a year is Rs. 1,50,000
2.                       After opening account minimum Rs. 500 is to be deposited each year. Penalty is Rs. 50 for default per financial year.
3.                       Amount can be deposited not more than 12 times in a year and not more than 2 times in a month.
4.                       The deposits shall be in multiple of Rs.100/- subject to minimum amount of Rs.500.
5.                       Amount can by deposited by cash or cheque or via online payment.

5. Period and Lock in period

PPF account is opened for a period of 15 years. However on expiry account can be extended to a period of 5 years at a time. It can be extended any number of times for a period of 5 years each.
Application form H for extension of period

6. Withdrawal of Amount from PPF

There is a lock-in period of 15 years and the money can be withdrawn in whole after its maturity period. However, pre-mature withdrawals can be made from the end of the sixth financial year from the year in which account is opened.
The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of 4th year preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.After 15 years of maturity, full amount can be withdrawn.

7. Closure of Account

1.                       Premature closure is not allowed before 15 years except in case of death.
2.                       Nominee/legal heir of PPF Account holder on death of the account holder can not continue the account, but account has to be closed.

8. Documents required for opening PPF account

·                          A recent passport size photograph.
·                          Identity Proof copy with original to verify (Even PAN Card may be accepted as all tax payers are having it)
·                          Address Proof copy with original to verify
·                          Account opening form for PPF
·                          Paying in slip for PPF a/c
·                          Nomination form for PPF

9.PPF Forms

1.                       Form A – To open a Public Provident Fund (PPF) Account
2.                       Form B – To deposit amount in PPF Account or to repay loans taken against PPF account
3.                       Form C – To make partial withdrawals from a PPF account
4.                       Form D – To request a loan against a PPF account
5.                       Form E – To add a nominee to a PPF account
6.                       Form F – To make changes to PPF account nomination information
7.                       Form G – To claim funds in a PPF account by a nominee/legal heir
8.                       Form H – To extend the maturity period of a PPF account

10. List of Banks where PPF Account can be opened

·                          State Bank of India (SBI)
·                          ICICI Bank
·                          Axis Bank
·                          State Bank of Travancore
·                          State Bank of Hyderabad
·                          State Bank of Mysore
·                          State Bank of Bikaner and Jaipur
·                          State Bank of Patiala
·                          Allahabad Bank
·                          Bank of Baroda
·                          Bank of India
·                          Bank of Maharashtra
·                          Canara Bank
·                          Central Bank of India
·                          Corporation Bank
·                          Dena Bank
·                          IDBI Bank
·                          Indian Overseas Bank
·                          Oriental Bank of Commerce
·                          Punjab National Bank
·                          Union Bank of India
·                          United Bank of India
·                          Andhra Bank
·                          Vijaya Bank
·                          Punjab and Sind Bank
·                          Uco Bank

11. Extension of Account beyond 15 years

Basic period of the account is 15 years however account holders can choose to extend the tenure. Tenures can be extended in 5-year blocks with or without making further investments.
·                          If no fresh investments are made after maturity, the account can continue earning interest on the amount accrued in the account until the end of year 15. Also, in this case, funds can be withdrawn freely once every financial year.

·                          If fresh investments are made after maturity – The interest will be calculated as per available balance in account. However, in this case, withdrawals will be restricted to a maximum of 60% of the amount held in the account at the start of each 5-year period of extension.