Public Provident Fund (PPF) – Amazing Features, Loans, 1.5L limit, returns etc.,

Public Provident Fund is a popular long-term savings scheme offered by the Government of India. It is a safe and secure investment option that provides attractive returns and tax benefits.

Tax benefits make PPF a highly attractive investment option for those looking to save taxes and build long-term wealth. Anyone who is a citizen of India can open a PPF account. Following are the details:

Age Criteria

The minimum age to open a PPF account is 18 years, and minors can also open an account with the help of their parents or guardians.

Limits

The minimum contribution amount for a PPF account is Rs. 500 per year, and the maximum contribution limit is Rs. 1.5 lakh per year. These limits are applicable for a financial year, which runs from April 1st to March 31st of the following year.

Withdrawal Limit

Public Provident Fund is a long-term investment, and the lock-in period for the account is 15 years. However, partial withdrawals are allowed after the completion of 5 years, subject to certain conditions. The maximum amount that can be withdrawn in a financial year is 50% of the balance at the end of the fourth year, or 50% of the balance at the end of the immediate preceding year, whichever is lower.

Loan facility

PPF depositor can take a loan on his deposit amount only once in a financial year. The second loan will be provided only after you repay the first loan. Interest rate of 1% per annum will be applicable on repaying the loan within 36 months. If it is repaid after 36 months, interest rate @ 6% per annum will be applicable.

Eligibility

Any individual who is a citizen of India can open a PPF account. An individual can open only one Public Provident Fund account in their name, and a joint account is not allowed. Non-resident Indians (NRIs) are not eligible to open a PPF account, but if they had opened an account before becoming an NRI, they can continue to contribute to the account until maturity.

Expected Returns

PPF offers an attractive rate of return, which is decided by the Government of India every quarter. The current rate of interest is 7.1% per annum, and the interest is compounded annually. The returns from PPF are tax-free, which makes it an attractive investment option.

Calculation of PPF amount

Rs. 1.5 Lakhs invested at 7.1% interest for 15 years will give you a lumpsum amount of Rs. 40.68 Lakhs. Please note that the interest rates were at more than 8% for the PPF deposits for several years in the past.

You can calculate with changed amounts and interest rates using the link below: PPF calculator

How to apply

Online mode:

All major banks like SBI, HDFC Bank, ICICI Bank, Axis Bank, etc., allow you to open a PPF Account online through their respective Net banking facilities.

To open a PPF Account, following documents are needed:

• An Identity proof (Voter ID/PAN Card/ Aadhar Card)
• A proof of residence
• Passport size photographs
• Pay-in-slip (available at the bank branch/post office)
• Nomination form.

Offline mode:

• Obtain an application form from the nearest post office or sub-post office
• After filling the form, submit it with the required KYC documents and passport sized photograph.
• The initial deposit required to open a post office PPF account is Rs. 500.
• Maximum amount allowed initially is Rs. 70,000.
• However, as mentioned above, the maximum deposit amount allowed for whole year is Rs. 1.5 Lakh. only.
• Post office will issue a passbook for the PPF Account which contains all the details like account holder’s name, PPF Account number, branch name, etc.,​​​​​​​

Summary

Public Provident Fund is a safe and secure investment option that provides attractive returns and tax benefits. The minimum contribution amount is Rs. 500 per year, and the maximum contribution limit is Rs. 1.5 lakh per year. The lock-in period is 15 years, and partial withdrawals are allowed after 5 years. The expected rate of return is currently 7.1% per annum, and the interest is compounded annually.

Learn about more safe investment options: Fixed Deposit