The Public Provident Fund (PPF) is one of the safest and long-term investment which comes with attractive tax benefits. PPF investment is simple and easy to manage. With the diversification of your investment, this product can be very useful and give you good returns in the long term.
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Here are some important things you must know about a PPF account.
Eligibility For Opening A PPF Account
Indian citizens are allowed to open a PPF account. You cannot open multiple PPF accounts in your name. So, you can’t open two different PPF accounts while you are allowed to open multiple bank accounts. Investing through a joint account is not allowed in a PPF. You can designate a nominee in your PPF account by filling the Form E.
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There is no upper age limit for opening a PPF account. A single parent or parents can also open a PPF account in a minor’s name. An NRI who started a PPF account when they were a normal citizen of India, can continue to hold the account till maturity. If you already have a PPF account, on maturity you can either exit the investment by redeeming the corpus or if you want to continue you may extend the PPF account in a block of 5 years as long as you want.
How Much Can You invest In A PPF Account?
Adhil Shetty, CEO, Bankbazaar.com, says, “You can open a PPF account with Rs 100. But, you must deposit a minimum of Rs 500 in a financial year to avoid deactivation, and a maximum of Rs 1,50,000 in a year. You can also get the tax deduction benefit u/s 80C. Investment over and above the limit of Rs 1.5 lakh in a financial year in the PPF won’t earn any interest.”
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If parents invest in the PPF scheme in the name of a minor child, the ceiling limit of Rs 1.5 lakh investment will still apply as the minor child and parents together should not exceed the Rs 1.5 lakh limit while investing in the PPF during a financial year.
Document Requirement
When opening a PPF account you need documents such as a self-attested copy of PAN, Aadhaar, voter ID, recent photograph, duly filled application, etc. If you are opening an account of a minor applicant, you may also need documents like a birth certificate, KYC details of parents along with a photograph, etc.
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Withdrawal Rules
The government has laid down strict rules and procedures for withdrawing one’s PPF amount. Knowing about these withdrawal rules is essential so that you can use the funds as per your needs. There are some exceptions to withdrawal rules depending on the account holder’s circumstance. The below table explains the withdrawal rules:
Things To Keep In Mind When Opening A PPF Account
Undoubtedly, PPF is a tempting investment instrument in terms of safety, tax benefit and steady returns. However, you should still be ready for a long-term commitment when planning to invest in the PPF. It offers a guaranteed return, but the rate of interest may fluctuate as and when the government decides to change it.
Shetty adds, “Currently, the interest rate applicable on PPF investment is 7.1% pa. The interest on the PPF is calculated on the lowest amount balance held between the 5th to the last day of every month, so it’s always better to deposit your PPF investment before the 5th day of every month.”
PPF is a safe investment option for the long term and suits well to people who want attractive tax benefits and returns like the EPF which is only available to salaried individuals.
