Public Provident Fund

Public Provident Fund (PPF) is the scheme of the central government formulated under the Public Provident Fund Act, 1968. It is a long-term small savings scheme which facilitates people to attain a security for retirement while saving tax by investing in the scheme. Interests are provided on such deposits.


Important Things to Remember

  • Only Indian residents can have a PPF account;
  • If an Indian resident becomes a NRI during his already activated PPF account, he may be allowed to continue it till its maturation;
  • The maturation period for a PPF account is 15 years while it can be extended again and again by a period of 5 years each time at the choice of the account holder;
  • Banks and post offices can open a PPF account;
  • A person can have only one PPF account in his name at a time;
  • Minimum yearly deposit is set at Rs 500 to open and maintain such account;
  • The maximum limit of yearly deposit (in a financial year) is Rs 1,50,000;
  • Deposits can be on a monthly basis or one time or in instalments;
  • The deposits are tax deductible under Sec. 80C of Income Tax Act;
  • The current rate of interest payable on PPF account is 7.9%.


Withdrawal Policy for PPF accounts

  • The entire money in the PPF account can be withdrawn on its maturity (the interest received is tax free);
  • One withdrawal per year is allowed after the completion of 5 full financial years;
  • The amount of withdrawal is limited to 50% of the total credit at the end of 4 years or the preceding financial year to the year in which the amount is to be withdrawn (whichever is minimum). The withdrawal amount is not repayable;
  • The limit of withdrawal in case the PPF account is more than 15 years old, is 60% of the amount at the end of the 15 years. The person has to apply through Form C;
  • Premature closure of PPF accounts may be allowed in case of serious ailments of the account holder or his spouse/parents or children and higher education of the account holder (the account holder has to forego 1% interest).


Loan from PPF account

  • The customer can avail the loan facility from the third financial year to sixth financial year in respect to the PPF account concerned;
  • He has to apply in Form D;
  • The maximum amount of loan that can be availed is 25% of the credit at the end of the preceding financial year;
  • The load has to be repaid within 36 months and also the interest at 2% of the principal amount.


Statutory Law References (Indian Kanoon)

Income Tax Act, 1961

Public Provident Fund Scheme, 1968

Public Provident Fund Act, 1968

Categories: law

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