Eligibility Individuals who are residents of India are
eligible to open their account under the Public Provident Fund scheme.
A PPF account may be opened under the name of a minor by his/her legal guardian.
However, each person is eligible for only one account under his/her name.
Non-resident Indians are not eligible to open an account under the Public Provident Fund
Scheme.
However a resident who becomes an NRI during the 5 years' tenure prescribed under Public
Provident Fund Scheme, may continue to subscribe to the fund until its maturity on a non-repatriation
basis.
Deposit to PPF is tax deductible for individual taxpayers in India u/s 80C of Income Tax Act,
1961.
FYI Investment and returns
A minimum yearly deposit of Rs. 500 is required to open and maintain a PPF account, and a
maximum deposit of Rs.1.5 lakhs can be made in a PPF account in any given financial year.
The government of India decides the rate of interest for PPF account.
The current interest rate effective from 1 April 2013 is 8.7% Per Annum.
Interest is calculated on the lowest balance between the close of the fifth day and the
last day of every month.
Loans Loan facility available from 3rd financial
year up to 5th financial year.
The rate of interest charged on loan taken by the subscriber of a PPF account on or after
01.12.2011 shall be 2% more than the prevailing interest on PPF.
However, the rate of interest of 1% more than PPF interest p.a.
shall continue to be charged on the loans already taken or taken up to 30.11.2011.
Features The public provident fund is established by
the central government.
One can voluntarily open an account with any nationalized bank,selected authorized private
bank or post office.
The account can be opened in the name of individuals including minor.
The minimum amount is Rs.500 which can be deposited.
The rate of interest at present is 8.7% per annum, which is also tax-free.
The entire balance can be withdrawn on maturity.
Interest received is tax free.
The maximum amount which can be deposited every year is Rs. 1,50,000 in an account.
The interest earned on the PPF subscription is compounded annually.
All the balance that accumulates over time is exempt from wealth tax.
Moreover, it has low risk – risk attached is Government risk.
PPF is available at post offices and banks.
Withdrawals from PPF account 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the money can be withdrawn in whole after its maturity period.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
when the PPF commenced.
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 PPF amount can be withdrawn and all is tax free, including
the interest amount as well.
PPF defaults and revival If any contribution of minimum amount in any
year is not invested then the account will be deactivated.
To activate you need to pay Rs.50 as penalty for each inactive year also you need to pay
Rs.500 for each inactive year’s contribution.
In case death of account holder then the balance amount will be paid to his nominee or legal
heir even before 5 years too.
So nominees or legal heirs are not eligible to continue the deceased account.
If balance amount is more than Rs.1,00,000 then deceased nominee or legal heir has to
prove the identity to claim the amount.
PPF tax concessions Interest earned is fully exempted from tax
without any limit.
Annual contributions qualify for tax rebate under Section 80C of income tax.
Contributions to PPF accounts of the spouse and children are also eligible for tax deduction.
Balance in PPF account is not subject to attachment under any order or decree of court.
But, Income Tax authorities can attach the account for recovering tax dues.
The highest amount that can be deposited is 1,50,000.
Tax bracket for PPF is EEE.
So contribution is exempted under 80C, Interest earned is tax exempted and withdrawal is also
tax exempted One can withdraw the investment made in 1st
year only in 7th year.
However, loan against investment is available from 3rd financial year.
See also PPF Related FAQ
National Savings Certificates References
External links Post-Office Saving Schemes
PPF Blog