Explained | What Is PPF And Its Benefits: Check Interest Rates, Tenure, Tax Rebate
New Delhi: Public Provident Fund (PPF) is one of the very popular long-term savings schemes in India. Crores of people have opened PPF accounts with the authorised banks and Post Office to ensure their future is financially stable. The savings plan is considered stable and secure because the central government controls it and assures fixed returns as it is not a market-linked scheme. The scheme targets individuals with a low risk appetite. In a PPF scheme, the money is deposited every month and interest is compounded. With PPF investments, depositors can diversify their financial and investment portfolios as it provides stable annual returns on investment.
PPF Tenure
The government rules state that a PPF account will have a 15-year lock-in period on investment. The depositor has the option to extend the tenure by 5 years with future deposits after the PPF lock-in period ends. The account matures upon completion of 15 full financial years from the end of the year in which the account was opened.
Joint accounts cannot be opened in the PPF scheme. The banks and Post Office allow individuals to open an account by cash/cheque. Notably, the date the cheque is realized in the government account is considered the account opening date. The Public Provident Fund nomination facility is available at the time of opening and also after the account is opened. The PPF account holder is allowed to open another account in the name of minors, subject to the maximum investment limit across all accounts.
For a PPF account, the minimum deposit is Rs 500/- and the maximum deposit is Rs 1,50,000/- in a financial year. The account holder can make investments on a lump sum or installment basis. However, an individual is eligible for only 12 yearly installment payments into a PPF account.
PPF Withdrawal
Withdrawal facility is allowed every year after 5 years, excluding the year of account opening. Depositors are allowed to make a partial withdrawal in case of emergencies. According to the rules, up to 50 per cent of the total balance can be withdrawn in one transaction each financial year succeeding the 4th year.
PPF account holders can avail loan facility from the 3rd financial year up to the 6th financial year. The investor is eligible for a loan amount no more than 25 per cent of the balance from the second year immediately preceding the loan application year. If a depositor pays off the entire first loan amount, the individual can opt for a second loan before the sixth year.
PPF Interest Rate
The PPF interest rate is notified by the Ministry of Finance on a quarterly basis. Currently, the PPF account holders are eligible to get 7.1 per cent interest on the deposits. The interest is credited to the beneficiary account at the end of each financial year after calculating for the calendar month on the lowest balance in the account between the close of the fifth day and the end of the month. The deposit amount qualifies for deduction under Section 80-C of the I.T. Act, and the interest earned in the account is free from Income Tax under Section -10 of the I.T. Act.
