Public Provident Fund – PPF, or public provident fund, is a well-known investment strategy because of the numerous features that cater to investors and the rewards that come with it. It is a long-term investing strategy that is well-liked by people who seek to generate substantial yet consistent returns. The main goal of those who open a PPF account is the proper protection of the principal amount. Read below to get detailed information related to the Public Provident Fund like Highlights, PPF Features, Significance, Eligibility Criteria, Documents Required to Open a PPF Account, Eligible Banks, Steps to Open a Public Provident Fund Account, Steps to Check Balance Online, Tax Implications, and much more
What is Public Provident Fund
A well-liked long-term savings plan is the PPF Plan because it combines tax benefits, rewards, and safety. To encourage small contributions and returns on those investments, the PPF plan was first put into place in 1968. The Income Tax Act does not apply to the interest and refunds earned under this program. Additionally, the investor may deduct the deposits made to the PPF Account under Section 80C of the Income Tax Act.
Public Provident Fund Details in Highlights
| Name | Public Provident Fund |
| Interest Rate | 7.1% per annum |
| Tenure | 15 years |
| Minimum Investment Amount | 500 Rupees |
| Maximum Investment Amount | Rs 1.5 lakh per annum. |
| Tax Benefit | Up to Rs.1.5 lakh under Section 80C |
| Risk Profile | Offers guaranteed, risk-free returns |
Features of Public Provident Fund
Some of the key features of the Public Provident Fund are as follows:
- Lock-in Duration: PPF has a 15-year lock-in period and is a long-term investment. This indicates that the money amassed in a PPF account can only be released at maturity, which is 15 years after the account is opened. After the conclusion of the real lock-in period, this tenure may be extended by five years. Withdrawals can be made early, but only in extreme circumstances.
- PPF Interest Rate: The government determines and pays the PPF interest rate quarterly. The PPF interest rate has been set at 7.1% for the fourth quarter of the fiscal year 2024–23, meaning from January 1 to March 31, 2024. The interest is computed each month on the lowest PPF balance in the account from the fifth to the final day of the month, and at the end of each fiscal year, the amount is credited to the PPF account. Investors in PPF are therefore encouraged to make PPF account contributions before the fifth of every month.
- Investment Requirements: Individuals must make an annual minimum investment of Rs. 500. A maximum investment of Rs. 1.5 lakh can be made in one financial year in a PPF account.
- Taxation: Because PPF is classified as Exempt-Exempt-Exempt (EEE) under the tax code, it also gives the best tax advantages. This firstly means that a person’s PPF investments are exempt from taxation for the relevant financial year (under Section 80C). Also, there is no tax obligation on the accumulated amount or the interest earned on PPF deposits.
- Loan Secured by PPF: A PPF account holder may borrow money secured by his PPF balance. However, the loan can only be taken after one year but before the conclusion of five years (from the end of the FY in which the initial subscription was made). A maximum loan of 25% of the PPF balance at the end of the second year, or the year before the year for which the loan is being used, is permitted.
Significance of a Public Provident Fund
For people who don’t like taking on a lot of risks, a public provident fund program is the best option. Given that the government has legislated this plan, it is supported by guaranteed returns to meet the basic financial requirements of the Indian populace. Also, the invested money in the PPF account is not linked to the market. Investors can diversify their financial and investment portfolios by implementing the public provident fund system. PPF accounts can offer consistent annual returns on investment during periods of economic downturn.
Eligibility Criteria for Public Provident Fund
The eligibility criteria for Public Provident Fund are as follows:
- A PPF account can only be opened by an Indian resident.
- PPF accounts cannot be opened by NRIs. Nonetheless, a resident Indian who opened an account but later became an NRI can keep the account open till maturity.
- For their underage children, parents and guardians can also open PPF accounts.
- Multiple accounts and joint account openings are prohibited.
Documents Required to Open Public Provident Fund
Some of the important documents required to Open a Public Provident Fund are as follows:
- Passport-size photograph of the individual
- PPF account opening form
- PAN Card
- KYC documents to verify the identity of the individual like an Aadhaar Card, Voter ID card, Driving License, etc
- Proof of Address
- Nomination form- Form E
Eligible Banks to Open a Public Provident Fund Account
| ICICI Bank | Bank of Baroda |
| State Bank of India | IDBI Bank |
| Indian Overseas Bank | Axis Bank |
| HDFC Bank | Corporation Bank |
| Allahabad Bank | Central Bank of India |
| Canara Bank | Union Bank of India |
| Bank of Maharashtra | Punjab National Bank |
| Oriental Bank of Commerce | Bank of India |
| Indian Bank | United Bank of India |
| Dena Bank | Vijaya Bank |
Steps to Open a Public Provident Fund Account
To open a PPF Account, the user needs to follow the below-given steps:
- First of all, log in to your net banking portal
- The dashboard of your net banking will open on the screen
- Click on the option Open a PPF Account
- Two options will open on the screen i.e.,
- Self Account
- Minor Account
- Now, select one of the options
- Enter all the required details like nominee details, bank details, etc.
- After that, verify details like your Permanent Account Number (PAN), etc.
- After successful verification, enter the amount that you want to deposit in your PPF account
- You will be required to set up standing instructions that will allow the bank to deduct the payment either in a lump sum or at predetermined intervals.
- You will receive an OTP on your registered mobile number when you make your decision.
- Your PPF account is opened after this verification has been completed. You should write down the account number that is visible on the screen for future use.
- Some banks may even request that you submit a paper copy of the information you entered along with a reference number and send it to the appropriate bank together with your KYC information.
Steps to Check Public Provident Fund Account Balance Online
The PPF balance can be easily accessed online if the PPF account was opened using a bank’s net banking service. Follow the below-given steps to check the Public Provident Fund Account Balance Online:
- First of all, log in to your net banking portal
- The dashboard of your net banking will open on the screen where the PPF account balance will be displayed on the screen
- You can obtain your account statement; submit your PPF loan application, set up standing instructions for your PPF account, and more by logging in to your account using internet banking.
Tax Implications on Public Provident Fund
The public provident fund program falls within the Exempt Exempt Exempt (EEE) category for investment. The investor’s withdrawal of funds will be completely exempt from investment returns and interest (maturity amount). Also, as long as the maximum contribution does not exceed INR 1.5 lakh, contributions made to a PPF account may qualify for Section 80C deductions.
Loan against Public Provident Fund
Loans may be obtained using the PPF investment as collateral. When applying for a loan against a PPF investment, one should be aware of the following:
- The loan can be used by the investor between the third and sixth years after the account is opened.
- The loan’s maximum period is three years or 36 months.
- Up to 25% of the PPF account’s balance from two years before the loan application’s submission may be borrowed.
- One can apply for a second loan before the sixth year starts if the first loan has been entirely repaid.
Interest on loan against Public Provident Fund
A 1% p.a. interest rate above the current PPF interest rate will be applied if the loan is repaid within 36 months. If the loan is repaid earlier than 36 months, a 6% annual interest rate added to the current PPF interest rate will be charged starting on the date the loan was disbursed. In EMIs, the interest is not paid along with the principal. The interest must be paid back within two months after the principal has been paid in full.