How to Open PPF Account and Maintain It?

In this article, we will be resolving all your queries related to the PPF account. We will be talking about the benefits of the public provident scheme, eligibility criteria and other queries.

Table of Contents

• What is Public Provident Fund?
• Tax exemption on PPF
• Who can open a PPF account?
• How to open a PPF account?
• How to Maintain a PPF Account?
• Lock-in Period and Withdrawl
• Difference between GPF, EPF, VPF and PPF

What is Public Provident Fund Scheme?

Public provident fund (PPF) was first implemented in the year 1968 in India. It was meant to mobilise small contributions for investments and returns. The aim was to help people have retirement funds while reducing taxes on an annual basis. It is a long-term tax-free investment option. Public provident fund offers stability even when the returns are not high. PPF interest rate are determined quarterly by the government. For the current financial year (i.e. FY 2023-24), the PPF interest rate is 7.1%. 

Tax Benefit through PPF

PPF scheme is a type of long-term investment that provides interest on the invested amount. Both principal and interest earned are exempted from tax. Deposit are qualified for deduction under Section 80c of the Income Tax Act. It provides Exempt-Exempt-Exempt (EEE) tax status. This interest is completely exempt as per Section 10(11) of Income Tax Act, 1961. Under Section 80C, you are allowed to avail tax exemption up to 1.50 lakh rupees. 

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Who can open a PPF account?

• Any resident Indian is allowed to open a PPF account.
• There is no minimum or maximum age limit is there to open a PPF account. 
• NRI and HUF are not allowed to open a provident fund account.
• Legal guardians or parents can open a PPF account for minors (anyone below 18 years of age).
• You can open a PPF account even if you have a GPF or an EPF account under your name. 

How to open a PPF account?

The process of opening a PPF account is quite simple. 

• Only resident Indians can open a Public Provident Fund account at any bank or post office.
• The account can be opened with at least 100 rupees. 
• One person is allowed to open only one PPF account.
• Submit KYC documents as the Proof of Identity (POI) or Proof of Address (POA):
  
  • As Proof of Identity (POI), you can submit either an Aadhar card, PAN card, voter ID card, driving license, passport or any government-issued photo ID card.
  • For proof of address (POA), all of the above-mentioned documents are valid. However, you can also submit bank statements, ration card and utility bills such as electricity, water or telephone landline bills that have your address mentioned. 
• One recent passport-sized photograph along with your signature on the back is required.

After fulfilling the KYC formalities, you will have to submit a nomination form with the designated beneficiary. 

Please note: While these are universal requirements, you should always confirm with your bank branch or post office to check if they have any other requirements.

How to Maintain a PPF Account?

• To keep your account active throughout the year, you will have to deposit a minimum amount of rs 500 within a financial year from April 1st- March 31. 
• You need to at least deposit once in your PPF account during a financial year. 
• In case, you fail to deposit this minimum amount, a penalty of rupees 50 will be levied on your account. 
• In simple words, the lowest balance that you will need to maintain in your account will be 500 rupees. 
• A maximum deposit of rupees 1.5 lacs is allowed within one financial year (April 1st - March 31st)

How to Access Your PPF Account?

Banks allow linking your PPF account to your Internet banking platform. Through internet banking, you can:

• View your account balance
• Check your transaction history
• Make contributions to your PPF account directly through your bank account
• Download account statement
• Update contact and nominee details

Similarly, the Government of India introduced an e-PPF facility in the year 2016 through which you can open, contribute and manage your PPF accounts. This is similar to the e-banking facility provided by banks.

Lock-in Period and Withdrawl

Lock-in Conditions

1. In normal circumstances, your investment will be locked in for a period of 15 years. 
2. You will have an option to extend this lock-in in the blocks of 5 years.

Withdrawal Conditions

1. After 15 years, you will be allowed to withdraw the lump sum amount. This will include both principal and interest acquired throughout the lock-in period. 
2. After 7 years since the start of the investment, you will have the option of partial withdrawal under a prescribed limit. You can take out half your money or premature closure in case of emergency.
3. From the 3rd year of the investment, you will be able to take a loan on 25% of the invested amount instead of withdrawing the entire amount.
4. During the period of extended 5 years (beyond 15 years), you will have the option to withdraw either the partial or full amount. Do remember that only one withdrawal in a single financial year will be allowed. 

Difference between GPF, EPF, VPF and PPF

Different provident schemes offer different benefits: