5 Basic Things You Should Know Before Investing in a PPF Account

Personal Finance

The PPF, or Public Provident Fund, was set up in 1968. It was made so that people could put away small amounts of money. It also encourages people to invest money in ways that give them a decent return. It is also a savings-accumulative-tax-saving investment vehicle. It enables you to save for retirement while paying less in yearly taxes. Those who want to save on taxes and make money should open a PPF account.

Most people think of PPF as a long-term investment for saving for retirement. It’s a tax break because you don’t have to pay taxes immediately. Tax and investment experts say that they usually mature in 15 years. The Department of Economic Affairs has maintained the PPF interest rate at 7.1% from April to June 2020. As an investor, PPF account holders should know the following.

Eligibility to Create a PPF Account

To start a PPF account, you must meet the following requirements:

  • Only people who live in India can create a PPF account.
  • If a non-resident Indian (NRI) opens an account while living in India, the account could stay open for 15 years. But NRIs can’t choose to keep the account open for longer.
  • Hindu Undivided Families (HUFs) can’t open a PPF account.
  • Each person can only have one account in their name.
  • People can also create a PPF account on a child’s behalf.

5 Basic Things to Remember Before Investing in a PPF Account

1. A Safe Investment Option

By putting money into a PPF account, you can bypass the anxiety of financial risks. It is a plan secured by the government. The Indian government regulates the PPF interest rate and begins to pay interest. Due to the government’s backing, it is a safe investment option for all Indians.

2. Guaranteed Returns But Fluctuating Return Rates

Since PPF is a government-backed plan, the return on investment is guaranteed but not set. Every three months, the government decides the interest rate for the PPF. According to historical returns, the PPF interest rate has decreased from 12% to 7% over the past few years. The PPF interest rate was 7.1% for Q3 of FY 2020–21 (October–December).

3. A Lock-in Period of 15 Years

A PPF account is best for people who want to invest their money for a long time. It comes with a 15-year maturity period. You can only withdraw money after 5 years of monthly payments. After the 15-year lock-in period, investors can add another 5 years to the term.

4. Ability To Take Loan Opposed To Your PPF Balance

You can invest in real estate, which is another great thing about PPF. In a pinch, you can purchase against your PPF account balance. The loan is available from the third to sixth years after the account is opened. You can only get a second loan after the first one is paid off.

5. Your PPF Account Could Stop Working

A person who wants to invest must put in at least Rs. 500 per year. You can only put Rs. 1.5 lakh into a PPF account in a year. If the investor doesn’t make the annual payment, the account will stop being used. To get the account back online, send a written request. Every year the account is inactive, you must pay a fee of Rs. 50.

Other Points to Remember

6. Gaining From the Earnings of the Spouse

More money will come to you if you open a PPF account on behalf of your spouse. If a spouse is given money and invests it, the income from the investment is added to the giver’s income. Since PPF is an investment that doesn’t cost you taxes, your tax bill won’t go up. So, you can put Rs. 1.5 lakh into the PPF scheme every year and get the benefits.

7. Best Investment for a Child’s Future

A guardian or parent can open a PPF account on behalf of a child. It can help build a tax-free fund for the child’s future needs. After the PPF account matures and the youngster turns 18, you can use the money properly.

8. Increase PPF Returns 

With a PPF account, investors can get the most out of their money. Invest Rs. 1.5 lakh at the start of the year. Interest in the PPF is calculated from April to March each year. To get the maximum money back, invest before April 5 each year. This way, an investment made once will earn profits for a whole year.

9. Strategic Deposit to Get Higher Interest

Interest on PPF balances is added at the end of each fiscal year. The amount in the account between the fifth and last day of the month determines the monthly PPF interest rate. So, it is suggested that you put money into the PPF every month before the fifth.

10. PPF Falls Within the Category of EEE Tax Exemption

PPF falls into the Income Tax category called EEE, which stands for “Exempt, Exempt, Exempt.” The Income Tax Act’s Section 80C permits you to deduct up to Rs. 1.5 lakh for PPF contributions. Second, neither the interest earned on the principal balance nor the amount due at maturity are taxed. This could be reason enough for people to choose PPF.


To invest in a government-backed plan for the long term, a PPF account is an excellent option. It helps people who are self-employed or run small businesses but don’t get help from the EPF. 

Also, people who want to keep saving and enjoy investments that don’t get taxed can put money in the PPF. Piramal Finance is a great option for you for such finance-related content. Visit their website to learn more about the products and services they offer.