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PPF Account - The Complete Guide

PPF Account: The Complete Guide (2019)

PPF is the abbreviation of Public Provident Fund.

PPF is a saving and investment scheme brought to you by the Government of India, wherein income tax is exempted not only on the principal investment amount but also on the interest earned by it.

The initial aim of this scheme was to benefit old age, retired individuals by providing with the accumulated money so that they can live a happy, and relaxed life.

PPF offers people an excellent plan to establish a long-term corpus by investing little amounts repeatedly over a period of time. A PPF account provides a helpful combination of safety, returns, and tax-saving benefits.

In short, PPF gives safety with superb interest rate and returns that are wholly exempted from Income Tax.

 

PPF Account - The Complete Guide

Contents

Eligibility for opening PPF account

A PPF account can be opened by any individual who is a resident of India. You can also open a PPF account on behalf of a minor. NRI’s (Non-resident Indian) and HUF(Hindu Undivided Family) cannot invest in PPF.

You have only 1 PPF account at a time.

 

How to open a PPF account?

You can open your PPF account at a post office or any bank like SBI, ICICI Bank, HDFC Bank etc. This can be done online if your bank allows else you can do it offline by visiting the branch.

Below mentioned is the list of documents needed to open a PPF account:

1. PPF Account opening form

2. ID proof that comprises any of these:

  • PAN card
  • Passport
  • Aadhaar Card
  • Driving license
  • Voter ID card

3. Address proof, any one of these:

  • Electricity bill
  • Landline bill
  • Aadhaar Card
  • Ration card

4. Two latest passport size photos

5. A signed cheque in favor of your PPF account or PAY-IN-SLIP to transfer the initial amount to your PPF account.

6. For opening PPF account for a minor, their birth certificate shall be required as the age proof.

All your documents have to be self-attested and their originals have to be taken while opening the account.

Make sure to mention nominee while filling the form else it becomes a hassle later.

 

PPF Investment Limit

The minimum amount to be invested in PPF is Rs 500 per year. The maximum amount is Rs 1.5 lakh. You can deposit the amount in a lump sum or in a maximum of 12 installments per annum.  You must deposit in the PPF at least once per year for 15 years.

 

PPF Duration

The duration of PPF is 15 years. It can be extended for 1 or more blocks of 5 years each. You must extend it within one year of maturity.

 

Benefits of opening a PPF account

 

Benefits of PPF

Interest Rate on PPF

The current interest rate for the quarter starting January 1, 2019, is 8% that is compounded annually. The interest is computed on the minimum balance between the close of the 5th day and last day of each month.

 

Loan against PPF Account

You can avail loan against your PPF account between the 3rd to the 6th financial year after opening the PPF.

 

PPF Withdrawal

Once you invest your money in PPF, your money remains locked for the entire period of 15 years. However, under special circumstances such as medical emergency or for higher education, you can close your PPF account and withdraw the funds only after the 5th financial year of opening the account.

 

PPF Transfer

You can transfer your PPF account from one branch to another of the same bank or from one bank to another bank as well as from a post office to a bank and the other way round for free of cost.

 

PPF Returns and Maturity Amount

Rs 1 lakh invested per year in PPF will yield to a maturity amount of Rs 29.3 lakh (at 8% interest p.a.) completely tax-free after the time frame of 15 years.

This is should be enough motivation for you to start investing in PPF now!

 

Year Opening Balance (Rs) Yearly Investment (Rs) Interest (Rs) Closing Balance(Rs)
1 0 100,000 8,000 108,000
2 108,000 100,000 16,640 224,640
3 224,640 100,000 25,971 350,611
4 350,611 100,000 36,049 486,660
5 486,660 100,000 46,933 633,593
6 633,593 100,000 58,687 792,280
7 792,280 100,000 71,382 963,663
8 963,663 100,000 85,093 1,148,756
9 1,148,756 100,000 99,900 1,348,656
10 1,348,656 100,000 115,892 1,564,549
11 1,564,549 100,000 133,164 1,797,713
12 1,797,713 100,000 151,817 2,049,530
13 2,049,530 100,000 171,962 2,321,492
14 2,321,492 100,000 193,719 2,615,211
15 2,615,211 100,000 217,217 2,932,428

PPF Tips to maximise your returns

Tip #1 – Don’t Delay

Time is of utmost importance in compounding returns so try to open and invest in PPF without delay.

 

Tip #2 – Invest Regularly

Although Rs 500 per year is sufficient to keep your PPF account active, you should invest regularly. Better would be to automate the monthly transfer from your savings bank account into your PPF.

 

Tip #3 – Invest Surplus from your savings

Apart from the regular investment you make, you should invest on other occasions as well for example bonus, gift etc. to increase your maturity amount effortlessly.

 

Tip #4 – Open PPF Account at the beginning of the Financial Year

For some of you, the lock-in period of a PPF may seem to be long. However, by opening a PPF account within the first 5 days of the financial year which is from 1st to 5th April, you can reduce it.

This is because the maturity date of PPF is calculated from the end of the financial year wherein the account was opened. So if you open your PPF account between the 1st and 5th it will be considered an investment of the current year.

The table below will make it clear.

PPF Starting Date PPF Maturity Date
16th April 2019 1st April 2035
3rd April 2019 1st April 2034

 

Tip #5 – Always invest at the start of a month

For interest calculation, the principal taken is the minimum of the balance between the 5th and the end of the month so in order to get maximum interest, you must invest before the 5th of each month.

 

Tip #6 – Choose Loan against PPF instead of Personal Loan

If you require a loan then always take a loan against PPF instead of Personal Loan. This is because the interest charged on loan against PPF is much lower than that charged on a personal loan.

 

Tip #7 – Open PPF Account for your children

You should open PPF account for your children while they are minors so that when they become adults, probably the 15 year period will be over and now in the extension, the lock-in period would be just 5 years.

 

Tip #8 – Prefer Banks with online PPF facility

This will make it easy for you to make regular investments in PPF at your convenience as well track them easily.

PPF Account: Frequently Asked Questions

Although all the required information if covered above, there are still some questions that might come in your mind. They have been answered below:

 

Should I invest in PPF?

Yes definitely. Every person must invest in PPF.

 

Why PPF?

As mentioned earlier as well, this is an investment option wherein you get fixed interest, completely tax-free. PPF is one of the trustworthy investment products as your investments in the fund comes with a guarantee of the Government of India.

 

Can we deposit more than 1.5 lakh in PPF?

No. Any amount in excess of Rs 1.5 lakh deposited in a financial year will not be accepted and the transaction will be reversed. Also, there is no reason to deposit more than Rs 1.5 lakh per annum as the extra amount will neither earn any interest nor will be eligible for a rebate under the Income Tax Act.

 

Can a housewife open a PPF account?

Yes, a housewife can open a PPF account in her name. Recall that as mentioned in the PPF eligibility, any individual can open a PPF account in his/her name.

 

How many PPF accounts can a family have?

There can be only one account per member of a family. So technically you can have as many PPF accounts as the number of members in your family.

 

Which bank is best for PPF account?

PPF is a scheme provided by the Government of India hence you don’t need to worry about the bank for PPF. The best choice would be to choose the bank wherein you have your savings account.

For your convenience, you can choose the banks which allow online PPF facility such as HDFC Bank, ICICI Bank, SBI Bank, Axis Bank etc.

 

Is PPF good investment?

Surely PPF is a good investment as it is risk-free as well as it helps tax-saving.

 

How many PPF account can one have?

One can have can only one account in his name at any given time. After 15 years, the PPF can be extended in blocks of 5 years or a new PPF account can be opened.

 

What is the maximum age to open PPF account?

There is no maximum age to open PPF Account. As mentioned previously there are no age requirements to open a PPF account.

 

Can a senior citizen open a PPF account?

Yes, a senior citizen can open a PPF account provided that he/she is a resident of India.

Is PPF safe?

Yes your deposits in PPF are completely safe.

 

Can we withdraw money from PPF after 5 years?

Yes, you may be allowed to withdraw money from PPF after 5 years in the occurrence of higher-education needs or medical emergencies provided that you are able to present the required documents as proofs.

Since it is a premature withdrawal, the interest rate that was to be originally provided will be deducted by 1%.

 

Is PPF withdrawal taxable?

No, PPF withdrawals are not taxable. As PPF comes under EEE category, no tax is to be paid on deposit, earning as well as withdrawal.

 

Is PPF interest calculated monthly?

Yes PPF interest is calculated monthly.

The interest on the funds in your PPF account is compounded annually and is credited at the end of the financial year. You must note that the PPF interest is calculated monthly and it is on the lowest balances in your account between fifth (5th) and last day of the month.

 

What is the maximum period for PPF account?

There is no maximum period for PPF account. You can extend your PPF any number of times after the term of 15 years is complete. Also, you have the option not to deposit any additional funds after extending your PPF.

 

Can I deposit cash in PPF account?

Yes, you can deposit cash in PPF account.

Cheque, Demand Draft, and Online fund transfer are the other payment options available.

 

Can I have 2 PPF accounts?

No, you cannot have 2 PPF accounts in your name. You can open another PPF account as the guardian of your minor child.

 

What happens if PPF account holder dies?

In this case, the funds in the PPF account shall be paid even before the completion of 15 years, to the nominee or legal heir of the departed person. Further deposits cannot be made into the account.

 

Can I transfer money to PPF account through Bhim app?

No, you cannot transfer money to PPF account through Bhim app or via UPI.

 

Can we transfer money to post office PPF account online?

No, you cannot transfer money to post office PPF account online. Many banks do provide this facility but the post office does not allow online money transfer.

 

Is PPF interest rate fixed?

No, the PPF interest rate is not fixed. The Government of India declares the rate of interest for PPF account on a quarterly basis.

The current PPF interest rate for Jan – March 2019 (Q4 FY19) is 8%.

 

Is PPF interest same in all banks?

Yes, the PPF interest rate is the same in all banks as it is decided by the Government of India.

 

Conclusion: PPF Account – The Perfect Guide (2019)

This is all you need to know about PPF. It is your turn now to take advantage of this information and to start investing in PPF if you haven’t done yet.

Did you learn something new from this guide on PPF account? Or perhaps you have a question.

Anyways, leave a comment below right now.

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