What is PPF Account | Benefits | Rules in India

  • Have you ever thought of investing?
  • Do you want to save money for your future?
  • Do you want to have a good and peaceful life after retirement?

The answer to above questions is obviously yes for all. Everyone wants to earn a higher income so that their present as well as future will be safe and for this particular purpose people start investing. They choose various schemes of investment.

Some were invested in savings, FD, RD’s, in stocks and bonds etc. among such investments there is investment called public provident fund (PPF Account).

It is the most popular fund for investments so many people are investing in this and taking the benefit of it.

It is a good investment for those who want higher with stable returns. It is beneficial for those who do not want to take a risk as this is risk free investment.

Now many questions start arising in your mind that:

    You will find all the answers to these questions. So firstly before investing one should know what exactly a PPF account is?


    What is a PPF public provident fund account?

    The public provident fund is a very famous scheme. It is a good investment for those who want higher with stable Returns.

    It is a long term investment which is made mainly for the objective like post-retirement benefits, medical requirement, for children educational purpose etc.

    This investment is less risky as it is provided by the government. The return on this investment is granted by the government.

    The public provident fund scheme provides a very good interest rate which makes this investment more attractive. This investor also provides tax benefit under section 80c of Income Tax Act 1961.


    What are the features of PPF accounts?

    Before investing in a public provident fund (PPF) account we should know the rules regarding PPF accounts.

    Following are the important feature of the PPF account:


    Amount of Investment

    In PPF account investment starts from minimum rupees 500 and it can be maximum of rupees 150000 annually. means you cannot invest more than rupees 150000 annually, if you want to invest then you have to consult with your bank and then in that case No interest is received for the excess investment.


    Lump-sum payment or Installment

    Investor has been given option to either invest the whole amount at the time that is lump sum investment or

    Investors can choose to invest on an installment basis, but maximum investment allowed is only  12 in a year, it means if you want to invest on an installment basis then you can invest an amount in only 12 transactions annually installment.


    Period of Investment

    If you want to invest in a PPF account then you should know that a PPF account has a lock-in period of 15 years. means you cannot withdraw your investment before expiry of 15 years.

    You have to keep your fund invested for 15 years. you can withdraw before expiry of 15 years only in certain cases which will be discussed further in this article.

    But if you want to keep your investment for above 15 years then you can do this. You can choose to extend the period of 15 years by blocks of 5 year after the 15 year expires.

    You can extend your period in the block of 5 year and continue in taking the benefit of interest. The benefit of extension of 5 years only be received to Indian residents none to non-resident Indian.


    Mode of Deposit

    Deposit in PPF accounts can be made through cash, check,  demand draft or electronic mode ( online fund transfer).


    Single Holder

    PPF accounts can only be held in the name of one individual. you cannot open account in joint name ( joint account)


    Risk involved

    A public provident fund is a less risky investment as the return on this is granted by the government.


    What is the interest rate of a PPF account?

    The Central Government determines the interest rate on public provident fund investment. This interest rate does not always remain fixed. The government keeps on changing the interest rate.

    The interest for the quote of 1st April 2020 to 30th June 2020 was 7.1 % per annum and now from 1st July 2020 it is the same 7.1 % per annum. the interest rate does not remain fixed, it keeps on changing.


    What are the eligibility criteria to invest in a PPF account?

    Indian citizens who are residing in the country are eligible to invest and open a PPF account in their name.

    Minors can also open PPF accounts in their own name but that account should be operated by their parents.

    This account is not permitted to be opened by a non-resident Indian, but if an existing account is opened that it will remain active to the date of completion.


    How to open a PPF account?

    You can open a PPF account through post office or nationalized bank.

    If you are eligible to open PPF account then you have two options available i.e. offline and online opening of account.

    In online procedure you just have to choose a bank or post office from which you want to invest.

    You have to submit certain document i.e.  KYC documents (Identity proof, address proof, signature proof, voter ID etc.), PAN card, photograph and other document as per the requirement.


    What is the loan against PPF investment?

    You can take a loan against PPF investment. You can take a loan of maximum 25% of the amount in account.

    But the loan is provided only from the beginning of 3 years till the end of sixth year from the date of investment and maximum period of loan is 36 months. you cannot take out a loan for more than 36 months.


    Rules for Withdrawal from PPF account?

    There is a restriction on withdrawal from PPF accounts for 15 years. you cannot withdraw before maturity of 15 years.

    But in certain circumstances like in emergency you can withdraw 50% of the accumulated fund at the end of the fourth year from the date of investment ( account opening date).

    This 50% withdrawal option is available after completion of 5 year from account opening.

    There are three situations in which you withdrawal fund:

    • After maturity of PPF account i.e. after completion of 15 years from investment. In this case after completion of 15 years you can withdraw the full fund (applicable in cases where you do not want to extend that tenure by five years).
    • In case of emergency you can withdraw before expiry of 15 year but can withdraw after completion of five year from the date of opening of account. you can withdraw 50% of the available balance in account.
    • If you do not want to carry on the PPF account if you want to close it then you have the option of premature closing of an account.

    But you can close the account only after completion of five years from account opening. In the case of medical treatment, education can prematurely close the account. In this case the whole amount can be withdrawn.


    What is the procedure of withdrawal from a PPF account?

    If you want to withdraw from your PPF account then you have to give an application to the bank for a post office where you have an open account.

    In application Form, you have to mention the following information:

    • PPF account number.
    • Date of opening of PPF account.
    • Amount to be withdrawn.
    • Signature of the account holder.
    • Completed tenures after opening of account.
    • Bank detail etc.

    It is important to know that there is no online PPF withdrawal facility in there till now.

    You have to submit an application in the bank if you want to withdraw.


    What are the benefits of a PPF account?

    There are certain benefits of PPF account that are:


    Tax benefit on investment

    Under section 80c of Income Tax Act 1961 you can take deduction of rupees 1.5 Lakh of the principal amount invested in PPF account and also total interest accrued on PPF account is exempt from income tax.

    So in short PPF investment is tax free investment which attracts the large investors.

    Tax exemption on PPF withdrawals

    under section 80c of  Income Tax Act 1961 partial or whole withdrawal from PPF account is exempt from income tax, so this attracts many investors.


    Option for withdrawal

    In case of emergency you have the option to withdraw from PPF account after the expiry of 5 years you can withdraw 50% of the amount.
    You can also prematurely close the account. in this way you can withdraw whole amount


    Payment in lump sum or installment

    Investor has given the option to either invest the whole amount at the time i.e. lump sum investment or

    Investors can choose to invest on installment basis. but the maximum installment allowed is only 12 in a year.



    A public provident fund (PPF Account) is a better investment who wants long term return with stable return. This investment secures your future and moreover the return on this investment is granted by the government, so it is a less risky investment.

    You have the option of lump sum or installment payment. You have the option of withdrawal in an emergency, and moreover various tax benefits are there on this investment.

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