Public Provident Fund (PPF) Account in India – How to Open, Validity and Tax Benefits


Most of the tax payers are not aware of the different options available to increase their savings. One of the best options available is PPF that offers good interest rate and maturity is also completely tax free. Currently interest rate in PPF is 8 % .

Public provident fund is a useful tool to save money and taxes. The central government has provided this investment option to all the citizens of India to accumulate fund for their old age. In this factor, I will discuss everything related to the PPF accounts in India like the procedure for opening a PPF account, tax benefits, interest rates, validity and maturity related information.

How to Open an PPF Account in India

Opening a P.P.F account is very simple and you can get a P.P.F account in a day after performing some formalities. At present all the salaried, self-employed and business men are eligible for opening a P.P.F account. Since this scheme is launched by the central government, you need not worry about the reliability or safety of these accounts. You can open a PPF account in a nationalized bank or in a post office. Remember that opening multiple PPF accounts is not allowed. In case, it is found that a person has opened second PPF account his second account is closed and the interest is not returned. In order to open a PPF account, just visit your nearest Bank or post office and ask for the PPF account opening form. You will have to attach two photographs, PAN photocopy and address proof. Once your PPF account is penned, you are provided a passbook which is just like the common savings account passbook. An important thing to consider while opening the account is to make a nominee in your PPF account.

Rate of Interest in P.P.F Account in India

At present PPF offers 8.0% interest rate. This interest rate may fluctuate but is generally more than the interest rate on the savings account. The interest is calculated on the minimum balance between the 5th and the last day of the month. Thus if you want to maximize the interest rate on the deposited amount, you should deposit the contribution before the 5th on the month.

Making Contributions to P.P.F. Account

Some of the key points related to making contributions to the PPF account are:
1) You can make a maximum of 12 contributions in a year. However, there is no restriction regarding the amount of deposit to be made. Thus you can make a deposit of Rs 10000 in January and then deposit Rs 4000 in February. We can say that PPF offers a lot of flexibility to the investor.
2) The minimum investment required in PPF in a year is Rs 500 while the maximum is Rs 150000. Earlier the maximum limit was Rs 70000 only but it was increased in Dec 2011.

Tax benefits of PPF Account

All the contributions made in the PP accounts are given exemption from the income tax. You can get an exemption up to 1, 00,000 per year u/s 80C. Another good thing about this account is that the maturity amount and the interest is also tax free. In fact, one of the most common reasons behind the popularity of the PPF accounts in India is the tax benefit associated with it.

Validity of PPF Account

A PPF account is valid for 15 years. It means that if you are opening a PPF account on 1st January 2012, it will be valid up to 1st January 2027. You can withdraw the maturity amount after this 15 years duration. However, you can withdraw up to 50% of the money deposited after seven years. There are two options to choose when the validity of the account is over. You can withdraw the maturity amount, close it and then open a new account. The second option is to extend the account for 5 years. You can extend one account for a single time only.

I hope this post helped you to understand the different features of PPF account in India. Remember that small contributions towards financial savings will lead to a happier tomorrow. Happy investing!


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