Public Provident Fund Scheme (PPF)

Overview

PPF means Public Provident Fund. In Hindi, it is called Lok Provident Fund. Public Provident Fund scheme is a savings scheme that provides good interest as well as tax savings. The government of India launched this scheme, and they provide interest too. The Government of India first established the Public Provident Fund in 1968. The aim was that the employees of the unorganized sector, who do not have the facility of EPF, Pension, etc., should also get a chance to save money for their future. The government kept PPF free from all forms of tax so that more and more people will subscribe to this scheme. The government runs the PPF scheme through its post office and banks.

Features of the scheme

Anyone can deposit money in the PPF account as many times as one can. It is necessary to accumulate at least five hundred rupees every year in a PPF account. While a maximum of one and a half lakh rupees can be deposited in this account during a year. NRI means non-resident Indian does not have the facility to open a PPF account. If you had opened a PPF account while a citizen of India, you can continue it until the completion of the accounting period.

Eligibility

The best thing about PPF is that any resident of the country can open it. Whether anyone is a serviceman, businessman or farmer, they can open your account in it. There is no age limit for opening the account. It is allowed to open PPF Account for children too. However, an individual can only open one PPF account in their name.

If someone already has a PPF account in their name, they can open a joint statement with neither their name nor anyone else's. No one can ever open another account in their name during the lifetime. If ever another PPF Account was found in your name, then another account will be deactivated immediately. There will also be no interest on the deposit amount in that account.

Maturity Period

The Maturity of the PPF scheme is very long. Under this scheme, the money is returned after 15 years of opening the account.

There is hardly any scheme other than insurance and pension schemes that mature after so many years. But the government has deliberately kept a long lock-in period as the purpose of this scheme is to raise money for retirement. Because of its long duration, its money is not spent on unnecessary things.

During the 15 years of PPF, the individual will have to deposit money every year. They can also take loans from the deposited money if needed. After seven years, there is provision for partial withdrawal as well. 

Extension

The PPF account matures in fifteen years, but there is no compulsion to withdraw money after Maturity. One can extend your account again for the next five years. After these five years are over, then the person can then reach your account for a block of five years. This sequence can last for the entire life. During the extension of PPF, the individual will continue to get interest as before. There will also be a lock-in of five years in the account, but it will only apply to new investments. However, the account holder can easily withdraw the deposited amount.

However, the person can keep pursuing the PPF account without depositing any new amount. But the benefit of tax deduction will be available only if the person forwards the account with the deposit condition. In such a situation, there will be a tax rebate on your deposit. After Maturity, one can get the facility to extend the accounting period by five years by filing a Form before completing one year. Even after this, if the individual wants to extend the period, then Form H has to be filled after every five years. But if one does not supply a form, the account will be automatically extended. But the person will not be able to deposit any new money in it.

Interest rate

As the PPF is a government scheme, and the government pays interest on it generously. And for that reason, the interest rate on PPF is much higher than the bank's fixed deposit. At present, the bank FD is getting an interest rate close to 6%. But at the same time, the interest rate of PPF is 7.1%.

However, the government reviews the interest rate of PPF every three months. But it is usually an effort to keep its rate attractive. The interest calculation of the PPF account is at the end of the financial year. That is, every year on March 31, the interest is calculated and added to your balance. However, interest is calculated every month. It is seen that how much was the minimum amount of money in account between the 5th to the last days of the month. Interest in the same amount is calculated.

Therefore, if you deposit money till the 5th of any month, the interest on that deposit will be received in the same month. But the interest will start connecting from next month on the deposit after the fifth date.

Documents needed

• KYC documents for the identity of the individual i.e., Driving License, Voter ID, Aadhar card, etc.
• PAN card
• Address/ Residence proof
• Nominee declaration form
• Passport size photographs

Official website

More details about this scheme can be found on the official website.

Frequently Asked Questions

Q. What is the Public Provident Fund?

PPF means Public Provident Fund, a savings scheme that provides good interest and tax savings. 

Q. Who launched this scheme?

The Government of India launched the Public Provident Fund in 1968. 

Q. What is the aim of the scheme?

The aim was that the employees of the unorganized sector, who do not have the facility of EPF, Pension, etc., should also get a chance to save money for their future.

Q. What is the main benefit of the scheme?

The primary benefit of the scheme is that it is entirely tax-free.

Q. What is the maturity period of the scheme?

The Maturity of the PPF scheme is very long. Under this scheme, the money is returned after 15 years of opening the account.

Q. Do I have to deposit money every year?

Yes, during the 15 years of PPF, the individual will have to deposit money every year. They can also take loans from the deposited money if needed. 

Q. Is there any provision for partial withdrawal?

Yes, after seven years, there is provision for partial withdrawal as well.