PPF is an investment product that you can use to save for retirement. It offers a fixed interest rate and allows you to deposit money in it as well as take out funds when needed. The interest rate on PPF is fixed every quarter by the Government of India and is currently at 8%. You can open a PPF account at any bank branch or post office. A PPF can be opened with no minimum deposit amount, but account holders have to deposit at least ₹ 500 each year to keep it active. This amount can be deposited in multiple installments as long as the total balance per financial year does not fall below ₹ 500.
PPF or Public Provident Fund
PPF is a retirement planning-oriented investment product. It’s a safe, tax-saving, and long-term investment option for your money. The interest rate on PPF deposits is determined by the Central Government every year.
PPF has been decided as an effective tool to save for future needs like education, health care, etc., without any risk involved in it. The interest earned from this fund can be invested in different shares of companies based on their performance or yield rates or anywhere else you want it to be invested in another asset or fixed deposit (FD).
The PPF account can be opened in the name of an individual, a minor, or a joint account. This scheme is available to every citizen of India irrespective of age, income, and occupation. You can deposit any amount ranging from ₹500 to ₹1.5 lakh per annum in this scheme and earn an interest rate depending on the tenure chosen by you.
Also read EPF – Employees’ Provident Fund, EPFO Benefits & Process.
PPF account interest rates
The interest rate on PPF is not linked to inflation. It does not change with inflation, unlike bank deposits or mutual funds whose rates are based on it.
PPF interest rates are also not linked to bank deposit rates, which can make it harder for investors to compare them effectively (see our guide for an explanation of why this matters).
You can open a PPF account at any bank branch or post office
You can open a PPF account at any bank branch or post office. You also have the option to open a PPF account online, which requires you to submit your application online and upload proof of identity and address.
To open an online PPF account, you will need an email id (which can be any email address) that has been registered with the RBI’s website; otherwise, you will be required to provide other information like date of birth, nationality, etc., when applying in person at any branch office or post office.
PPF accounts are only opened by Indian citizens and NRIs who are 18 years old or above as per RBI rules (1st January 2016).
PPF deposit requirements
A PPF can be opened with no minimum deposit amount. However, account holders have to deposit at least ₹ 500 each year to keep it active. This amount can be deposited in multiple installments as long as the total balance per financial year does not fall below ₹ 500.
The interest rate on a PPF is fixed at 8% till 2045 and then stands revised every quarter by RBI based on the inflation target set by it for that quarter along with other factors like rupee-dollar exchange rate or market risk premium etc., which may result in the difference between actual return earned during an account’s term compared with theoretical expectation of return if all risks were eliminated (i.e., the same amount invested today would generate much higher returns).
PPF account deposit limits
A PPF account can have a maximum balance of ₹ 1.5 lakh at any given time. Deposits above this limit will not earn any interest for the year.
If you deposit multiple installments in your PPF account over different financial years, you’ll get tax benefits on these deposits as well as their earnings (if they exceed the basic amount).
PPF accounts cannot be operated online yet – account holders have to visit their bank or post office branches
You can open a PPF account at any bank branch or post office. The minimum amount for opening an account is Rs 500, and there is no upper limit on how much you can invest in it.
There are two types of accounts – one where you have to deposit your money into the account and another where you will receive interest based on how much money you put in it. These accounts do not carry any limits on their investment amount unlike earlier where only certain amounts could be deposited into them depending upon the purpose they were being used for (e.g., buying gold).
Rules for PPF accounts
Only one PPF account can be held per individual at a time. An individual cannot hold more than one PPF account in his or her name.
The PPF accounts cannot be operated online yet and have to be opened through banks or post office branches.
Account holders have to visit their bank or post office branches for opening the new PPF account, which will require them to submit documents such as proof of identity, address proof, and signature.
PPF Withdrawal Rules
- You can withdraw your funds from the PPF account after maturity.
- You may withdraw your funds from the PPF account at any time, but you must give 30 days’ notice to deposit or withdraw the amount.
- The withdrawal will not be allowed if there are any restrictions on it under the rules of the PF scheme by the Government of India such as those mentioned below:
-If the amount is less than Rs. 10,000. -If you are a minor (under 18 years of age).
-If you are a person of unsound mind or undergoing treatment for mental illness.
PPF account loans
You can take a loan against the balance in your PPF account from the third financial year onwards till the end of the sixth financial year. The loan will be limited to 25% of the lower balance between the end of the 4th year preceding the year of taking the loan and the end of the previous financial year before sanctioning of the loan.
If you have an existing balance in your bank account, then it is possible to transfer funds from that account into your PPF account and then withdraw them after 5 years.
A glance at various angles of PPF accounts
|Interest Rate of PPF||7.1% (Q3 FY 2022-23)|
|Minimum Investment||Rs. 500|
|Maximum Investment||Rs. 1.5 Lakh p.a.|
|Tenure||15 Years (Can be extended in blocks of 5 years thereafter)|
|Tax Benefits||Up to Rs.1.5 lakh under Section 80C|
PPF is an excellent investment product for saving and it also provides an opportunity to earn interest on your balance. Once you open an account, it is mandatory to make at least a minimum of ₹ 500 per year. You can deposit more money in your account by making multiple installments as long as all the amounts do not fall below ₹ 500 per year.
Also, read Saving Schemes In India.
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PPF: Eligibility, Tax Benefits, Interest Rate, How to Open Online, Withdrawal
Will I continue to earn interest on my inactive PPF account?
Interest is not computed for the year or years that the account is dormant. Interest will be computed on the entire sum available at the moment the account is resurrected.
Can I open a PPF account on the behalf of my grandchild?
Only parents or legal guardians are permitted to create and manage a PPF account on behalf of their minor child or ward.