Considering Opening a PPF Account? Explore Features, Tax Advantages, and Interest Rates

The financial market offers a variety of savings instruments with diverse structures and returns. Some investments are market-dependent, yielding returns based on market performance, while others guarantee fixed returns. Certain options have no lock-in period, while others come with a specified lock-in duration. Among the fixed-return savings instruments, the Public Provident Fund (PPF) stands out.

As part of the small savings schemes, the PPF’s interest rates undergo quarterly reviews. Widely regarded as one of India’s most popular government-backed saving schemes, the PPF provides a long-term investment avenue with a sovereign guarantee. Offering benefits surpassing those of Fixed Deposits (FDs), the PPF scheme enables individuals to accumulate wealth over an extended period.

Key Features of Public Provident Fund

1. Investors can contribute as little as Rs 500 per year or as much as Rs 1.5 lakh per year to their PPF accounts.

2. The investment tenure can extend up to 15 consecutive years, with the option to further extend in blocks of five years through the submission of a PPF Account Extension Form.

3. PPF qualifies as one of the rare schemes with an Exempt-Exempt-Exempt (EEE) feature, making it a completely tax-free savings option. No tax is levied on the principal, profit, or the accumulated amount upon withdrawal.

4. PPF accounts can be opened by single adult residents or guardians on behalf of minors or individuals of unsound mind.

Public Provident Fund Interest Rates

The government has set the interest rate for PPF at 7.1% per annum.

Withdrawing Public Provident Fund

1. Premature withdrawals are allowed after five years, excluding the account-opening year. Only 50% of the balance at the end of the fourth preceding year or the preceding year, whichever is lower, can be withdrawn.

2. After 15 years, a PPF subscriber can opt for maturity payment by submitting an account closure form along with the passbook at the relevant Post Office.

3. Alternatively, the subscriber can retain the maturity value in the account without further deposits, with the PPF interest rate continuing to apply. Withdrawals are permitted at any time, or one withdrawal per financial year is allowed.

4. Extension of the PPF account for additional blocks of five years is possible (within one year of maturity) by submitting the prescribed extension form at the concerned Post Office.