The National Savings Institute of the Ministry of Finance 1968 introduces the Public Provident Fund (PPF). It is an investment tool that has a wide range of features that make it an extremely attractive investment for investors. The PPF scheme’s key benefit is that it provides a high but steady return on the amount deposited. In other words, PPF accounts are opened by people who desire to preserve their main savings and make sure of their post-retirement lifestyle.
Read: Employees Provident Fund (EPF) – Eligibility, Interest, Calculation, Form
What is the Public Provident Fund (PPF)?
When a scheme is created for PPF, the applicant is given a PPF account where the money will be deposited every month and interest will be compounded accordingly which means the interest associated with it will increase exponentially. A PPF account can also be opened online.
If you are searching for a strategy for long-term investing then the Public Provident Fund (PPF) is a popular choice among investors looking for tax-saving investment options. It offers interest in addition to principal tax exemption. One benefit of PPF investments is that you can get favorable interest rates with minimal risk. You can also benefit from partial withdrawals and lending facilities. You may access mini statements, check your balance, and transfer money online from any location at any time.
A small savings program backed by the government that provides long-term savings and tax benefits is called the Public Provident Fund (PPF). A Public Provident Fund account must be opened to invest in it.
The maturity time for PPF is 15 years. The user may also choose to prolong the tenure for more than 5-year periods after the lock-in term is over.
Importance of a PPF Account
For people who don’t like taking on a lot of risks, a public provident fund program is the best option. Since the government of India has legislated this plan, it is supported by guaranteed returns to meet the basic financial requirements of the Indian population. Also, there is no market connection between the investments made in the PPF account.
Investors can vary their investment and financial portfolios by implementing the public provident fund system. PPF accounts can offer consistent annual returns on investment during periods of economic downturn.
- PPF is appropriate for individuals who have a low tolerance capacity for risk and is regarded as one of the best investing options.
- The earnings from this investing strategy are low because it is connected to the market.
- The returns are fixed, can be utilized as a strategy for diversification, and provide tax benefits.
Features of a Public Provident Fund (PPF) Account
The key characteristics of a public provident fund scheme can be listed as follows–
Criteria for Eligibility
A PPF account can be opened in the name of an Indian citizen who resides in the nation. Minors may also open a Public Provident Fund account in their names as long as their parents are the ones who manage it.
Indians who don’t live there aren’t allowed to create a new PPF account. Nonetheless, any open accounts in their names continue to be operational until the term is over. Indian residents may benefit from the 5-year extension restriction on these accounts.
Interest Rate on a PPF Account
The Central Government of India sets the interest rate for public provident fund programs. It attempts to offer greater interest than conventional accounts kept by different commercial banks around the nation. The government may decide to alter the interest rates on these accounts every quarter; the present rate is 7.1%.
How Can I Apply for a PPF Account?
As long as the applicant satisfies the eligibility requirements, both offline and online procedures are available to them. You can activate PPF online by going to the portal of your preferred bank or post office.
When a public provident fund account is activated, the following documents must be produced:
- Documents proving a person’s identification, such as Aadhaar, a voter ID, a driver’s license, etc.
- PAN Card
- Residential address proof
- Form for nominee declaration
- Passport-sized photograph
Public Provident Fund (PPF)– Tax Benefits
For the main amount invested in a PPF as an account, income tax exemptions are applied. Under section 80C of the Income Tax Act of 1961, the entire investment value may be claimed as a tax exemption. However, it should be remembered that the maximum amount of principal that can be invested in a single fiscal year is Rs. 1.5 lakh. Also, the total interest earned on PPF investments is not subject to tax computations.
As a result, there is no tax on the total amount redeemed from a PPF account when it reaches maturity. Many investors in India find the public provident fund program attractive as a result of this policy.
Loan Against PPF Program
- You may get a loan here between the third and fifth years of your PPF account.
- A maximum of 25% of the second year that came right before the loan application year may be borrowed.
- Before the sixth year, a second loan may be obtained if the first loan is fully repaid.
How to Withdraw PPF Funds
The procedure for withdrawing from a PPF-
You can take a full or partial withdrawal of the funds in your PPF account.
Step 1: Fill out Form C, the application form, with all the required information.
Step 2: Hand in the application at the bank branch where you have your PPF account.
How to Link Aadhaar to Public Provident Fund Account Online?
Step 1: Sign in to your online banking account.
Step 2: Click “Registration of Aadhaar Number in Online Banking.”
Step 3: Enter the 12-digit Aadhaar number and press the “Confirm” button.
Step 4: Choose the Public Provident Fund account that your Aadhaar card will be linked to.
Step 5: Click “Inquiry” to see if the Aadhaar linking has been completed.
How to Close a PPF Account?
A PPF account may be closed when 15 years have passed since the account’s opening. The following steps explain how to close a PPF account at the post office:
Step 1: Complete Form C with the necessary information and attach your PPF passbook.
Step 2: Hand this over to the relevant Post Office or bank location where the account is held.
Step 3: After processing your application, the account will be closed. The money will be deposited into your savings account which is connected to your PPF account.
Conclusion
PPF accounts are provided by the Indian government and are not tied to any particular bank. Whenever you open a PPF account, all banks offer the same advantages and benefits.
Anywhere the PPF account is held, the interest rate is fixed by the government and does not change. Therefore, no best bank offers a PPF account.
