Public Provident Fund Scheme | Eligibility, Features, Importance

2023-03-14

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Public Provident Fund Scheme: The Public Provident Fund Scheme (PPF scheme), introduced in 1968 by the National Savings Institute of the Finance Ministry, is a favored long-term savings plan in India due to its unique blend of tax savings, safety, and returns. Its primary goal is to encourage small savings and generate returns on them. Furthermore, the scheme provides an appealing interest rate and the interest income generated is tax-free. Check out the sections below and get to know the Public Provident Fund Scheme Importance, Public Provident Fund Scheme Features, Public Provident Fund Scheme Eligibility, and more.

Table of Contents

Public Provident Fund Scheme – Overview

Public Provident Fund Scheme
Name of the Scheme	Public Provident Fund Scheme (PPF)
Established By	Central Government of India
Beneficiaries	Citizen of India
Category	Govt Schemes
Investment Amount	Minimum Rs. 500/-, Maximum Rs. 1.5 lakh p.a.
Interest rate	7.1%
Tenure	15 years (Can be renewed in blocks of 5 years)
Maturity Period	Depends on the investment tenure

Public Provident Fund Scheme Importance

PPF is an excellent investment tool and ideal for low-risk investors.
The investment returns may be lower due to its market-linked nature.
The returns from PPF are fixed and can be used to diversify the investment portfolio.
Additionally, PPF offers tax-saving benefits.

Public Provident Fund Scheme Features

PPF Account Features:

Investment Limits: Minimum investment of Rs.500 and maximum investment of Rs.1.5 lakh per financial year.
Tenure of the PPF: Minimum tenure of 15 years, extendable in sets of 5 years.
Deposit Frequency: Deposits must be made once every year for a tenure of 15 years.
Opening Balance: PPF account can be opened with a minimum of Rs.100, and annual investments over Rs.1.5 lakh will not earn interest.
Nomination: PPF account holders can nominate someone for their account when opening the account or after.
Mode of Deposit: Deposits can be made via cheque, cash, demand draft, or online fund transfer.
Risk Factor: PPF is backed by the Indian government and offers risk-free, guaranteed returns.
Joint Accounts: Only one individual can hold a PPF account.

Public Provident Fund | Eligibility to Open PPF Account

To invest in the PPF, you must be a citizen of India.
Only one PPF account can be opened, except for a second account in the name of a minor.
NRIs and HUFs are not eligible to invest in the PPF.

PPF Interest Rate

The PPF interest rate, which is set annually by the Finance Ministry, is currently 7.1% and compounded annually. Interest is paid on March 31st and calculated based on the minimum balance between the fifth and last day of the month.

How to open a PPF account?

A PPF account can be opened at banks or post offices by individuals.
Previously, Nationalised Banks were the only institutions where one could open a PPF account. However, private banks such as Axis, HDFC, and ICICI Bank also offer the PPF scheme.
The following documents are required to open a PPF account: application form, ID proof (such as an Aadhaar card, Permanent Account Number (PAN) card, passport, etc.), address proof with current address, and signature proof.
Once the necessary documents are submitted, the required amount can be deposited to open a PPF account.

How to Close a Public Provident Fund Account?

Withdrawal from Public Provident Fund (PPF) account is not allowed after the completion of its tenure of 15 years.
You can access and withdraw the balance of your PPF account only after the completion of the full 15-year tenure.
Before the completion of the full tenure, you cannot withdraw the entire balance of your PPF account.
However, after completing 5 years of the PPF account, you can make a premature withdrawal of up to 50% of the account balance.

PPF Withdrawal

Upon maturity of your PPF account, which has a tenure of 15 years, you may withdraw the entire maturity amount, including the accrued interest, to your bank account. If you require funds before maturity, you may make a partial withdrawal from the seventh year onwards. A premature withdrawal of up to 50% of the available amount at the end of the fourth year is possible, but only once.

How to withdraw funds from the Public Provident Fund?

Fill in an application form with Form C and provide necessary details.
Submit the application form to the bank branch where the PPF account is held.

How to link Aadhaar with a Public Provident Fund account online?

Access your internet banking account.
Look for the option ‘Registration of Aadhaar Number in Internet Banking’ and select it.
Enter your 12-digit Aadhaar number in the given space and click on ‘Confirm’.
Select the Public Provident Fund account that you want to link with your Aadhaar card.
Verify if the linking process is successful by clicking on ‘Inquiry’.

How to withdraw funds from Public Provident Fund Account before maturity?

Check if you are eligible for premature withdrawal of your Public Provident Fund.
Download Form C if you are eligible.
Provide an additional declaration if the account is in the name of a minor.
Submit the form and documents to the bank or post office branch.
Wait for verification of information and documents.
Withdraw the money once the bank or post office processes the forms.

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