A Complete Guide to PPF (Public Provident Fund)

Personal Finance

To have a secure future, you need to save and invest. But you must select a low-risk investment scheme where you can get good returns as well. There are many such saving schemes that you can opt for, but only a few can match the benefits of the Public Provident Fund (PPF). PPF is a savings scheme introduced by the National Savings Institute. The process of opening a PPF account as a bank PPF or as a post office PPF online is simple. You need to fill out the application form and submit it with relevant documents and an initial deposit.

A PPF pension can be a great source of income after you retire from active work. It will allow you to lead a secure and comfortable life even after you stop working. But to avail the benefits of PPF, you need to learn all about the PPF post office or bank. Read on to learn more about this popular savings scheme and then make your decision.

What is PPF?

PPF is a very well-known savings scheme. Any person can start a bank or post office PPF online and start saving money. The PPF account has a lock-in period of 15 years and can be extended in blocks of 5 years. There is no limit on how long you can extend the PPF post office or bank account. During this period, only partial withdrawals are allowed. That is, you cannot close your PPF during the mandatory lock-in period. The minimum duration for PPF is 15 years, and you must invest a minimum of INR 500 per year to keep this account active. While complete withdrawal is not allowed, you can get a loan against your PPF to meet your urgent needs.

The maximum amount that you can save in a PPF account in a year is INR 1.50 lakh. The interest rate on PPF is set by the government every year. As it is fixed by the government, it carries a very low risk. Even if your profits are limited, the safety net is very useful In fact, you can plan to get the PPF pension with full certainty. On top of that, it is also eligible for tax benefits under Section 80C of the Income Tax Act, and the interest you earn on PPF is also tax-free, as is the corpus you receive after closing the account. Hence, the benefits are enormous.

Key Aspects of PPF Post Office or Bank

Here are some of the key aspects of the PPF account that you must know. This will help you make an informed decision:

  • In any given year, i.e., from April 1 to March 31, you can deposit a maximum of INR 1.50 lakh. The least amount you must deposit is INR 500. You can deposit this amount as a lump sum or in installments, as you prefer. The total deposit for the year cannot exceed INR 1.50 lakh. If you do not make any deposits in a year, you will have to deposit at least INR 500 for every missed year to make the account regular. 
  • After the 7th year, you can withdraw some money from your PPF at the post office or bank. But you can only draw the money up to a certain limit, i.e., a partial withdrawal. You cannot withdraw any funds from your account before the seventh year. 
  • You can get a loan against your PPF account to raise money for any urgent needs. This option becomes available after the third year of opening a PPF post office or bank account. But this option is available to you only until the sixth year. Thereafter, you cannot take a loan against the PPF. 
  • Your bank or post office PPF online account can be closed after 15 years from the start of the account. For example, if you started your PPF in 2007, it would close in 2022. After the account is closed, you will receive the entire amount in your bank or post office savings account. This entire corpus is tax-free. This means the money you invest in the first year will be invested for 15 years, while the money you invest in the 14th year will be there for one year only. 
  • You have the option to extend the PPF account for as long as you want in a block of 5 years. During this extension, you may or may not make any new deposits in the account. The amount that is already in the account will earn returns based on the rate of interest given by the government. There is no upper limit on the number of extensions you can take. 
  • Under Section 80C of the Income Tax Act, the money you deposit in a PPF account is good for tax benefits. You can deposit up to INR 1.50 lakhs in this account, and it will all be eligible for tax exemption. The interest you earn during this period and the corpus you receive on maturity are both tax-free. 
  • The money you have in your PPF post office or bank account is safe from attachment under any court order or decree. As a result, if you have any legal disputes, no authority can seize this money.

A PPF pension is a good source of income after you retire. But to ensure this steady income, you need to start your bank or post office PPF online or offline. To learn more about PPF and its benefits, visit Piramal Finance. They offer great articles and blogs to help you improve your finance skills and make informed decisions.