PPF stands for Public Provident Fund, offered by the National Savings Institute in the year 1968. It is a government-backed, long-term tax savings scheme in India that offers assured returns. This plan offers a fixed interest rate, taxation benefits, & a lock-in period of 15 years. PPF involves regular contributions with capital protection, which not only helps individuals to accumulate funds but also helps them gain financial resilience. This lets an individual manage with uncertain situations & financial constraints in a more effective manner.
Features of a PPF Account
Provided are the features of a PPF account:
· PPF does not allow multiple accounts, i.e. only one account can be owned by one individual.
· A PPF account can be opened by either a parent or a guardian for a minor.
· It does not allow a joint account to be opened.
· The minimum deposit amount is INR 500.
· The maximum deposit amount is INR 1,50,000.
· The deposits can be made either in a lump sum or in instalments.
· In case the minimum amount is not deposited each year, the account is discontinued.
· The mode of deposit can be cheque, cash, DD, or online fund transfer.
· The nominee has to be appointed at the time of account opening.
· The interest rate is to be fixed by the Finance Minister.
· The interest amount is calculated on a monthly basis on the amount deposited on the 5th of every month.
· Hence, the amount should be deposited by the subscribers on the 5th of every month.
· The interest is to be credited at the time of end of the financial year.
Tips to Manage your PPF Account
Provided are the tips to manage your PPF account:
· Regular Contributions
An investor should contribute on a regular basis towards the PPF account by setting up an automatic payment facility. This instils a habit of disciplined savings as an effective long-term Money-Saving Plan.
· Monitor Account Status
Review the account status for balance & interest accrued thereon via mobile banking or net banking.
· Make use of Partial withdrawals.
Once a period of 5 years has been met, an investor can withdraw the funds partially in case of any emergencies.
· Extend the Account
An investor can also extend the account by a block of 5 years once a period of 15 years has been met.
Steps to Open a PPF Account?
A PPF account can be opened either online or offline. Let us understand both the methods:
A) Offline Method
Provided are the steps to open a PPF account via the offline method:
Step 1: Visit a nearby post office or a bank’s branch to get a PPF account opening form. Also, it can be downloaded online.
Step 2: Fill out the account opening form with all your required details & submit it along with your passport-sized photograph & KYC details.
Step 3: Deposit the initial deposit that is required to open the account, which can range between INR 500 & INR 1,50,000.
Step 4: Once the account is opened, a passbook will be provided to update the transactions made.
B) Online Method
Also, one can avail of the facility to get his/ her account opened online by following the steps:
Step 1: Open your bank’s internet banking portal.
Step 2: Click the tab “Open a PPF Account”.
Step 3: Select a suitable option between “Self Account” & “Minor Account”.
Step 4: Input the details, such as bank details, nominee details, etc.
Step 5: Verify the PAN number that is displayed on the screen.
Step 6: Once the details are verified, provide the amount to be deposited in your PPF account.
Step 7: Provide your bank with standing instructions as to how much is to be deducted & whether in a lump sum or at a fixed interval.
Step 8: An OTP will be received at your registered mobile number.
Step 9: Your PPF account is now open.
Step 10: In the case of some banks, you may be asked to provide a hard copy of the reference number with your KC details.
How to Withdraw from a PPF Account
Provided are the withdrawal rules with respect to a PPF account:
· This account allows withdrawal of funds once a lock-in period of 15 years has been met.
· Also, it offers an additional option for early withdrawal of funds, but only after a lock-in period of 5 years has been met.
· It allows withdrawal of maximum up to 50% of the amount in the previous year.
· Download Form 2 & fill out the details for the withdrawal.
· The withdrawal of funds can also be made online by logging into the web portal of your respective bank.
· Also, a Form-C can be filled out to make a partial withdrawal from PPF.
· Submit the respective forms to the bank to get the amount withdrawn.
How to close a PPF Account?
Provided are the conditions to be met for a premature closure:
· Fill out Form no 5 to get a premature closure of the PPF account.
· The funds can be withdrawn if needed for the treatment of any life-threatening disease of the self, spouse, children, or parents.
· It requires the provision of certain documents.
· If the amount has to be paid for the account holder’s or their children’s higher education.
· In case of a change in residency of the account holder.
· The account has to be closed once a period of 5 years has been met from the date of opening of the PPF account.
· The interest rate of 1% is to be deducted from the date when premature withdrawal is made.
Choose PPF if:
· You want assured & secured returns.
· You are a risk-averse investor, i.e. not willing to accept risk.
· You have long-term financial objectives.
· You prefer a simple-to-understand financial plan which is not linked to the market.
Conclusion
A PPF best suits a risk-averse individual, i.e. who avoids taking risks or prefers low-risk. These investments are backed by the government, hence offer assured returns. Under PPF, the premium paid is eligible for a tax deduction u/s 80C, subject to a maximum of up to INR 1.5 lakhs. The interest earned & maturity amount are exempt from tax u/s 10(11).
