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What is the PPF – Public Provident Fund Scheme

Public Provident Fund Scheme (‘PPF’) is a popular long-term saving scheme along with tax saving features. This plan is guaranteed by the Government of India. The scheme helps the subscriber to build a retirement corpus. Interest paid is exempt in the hands of the investor. The best feature of PPF is the ‘EEE method (Exempt- Exempt- Exempt method).

What is the interest rate on PPF?

The interest rate is 7.1% per annum (compounded yearly) wef 01.04.2020. The interest rate on PPF for an earlier period can be referred to in Annexure ‘A’ Rate of Interest is determined by the Central Government quarterly.

Interest on PPF is calculated on the lowest balance at the credit of an account between the close of the fifth day and the end of the month shall be eligible for interest.

Tax benefit of investing in PPF

• Interest paid is exempt from income tax.
• Amount invested in PPF is allowed as a deduction under section 80C subject to a maximum amount of Rs 1,50,000/-.
• Amount withdrawn after maturity is tax-free.
• PPF also falls into the ‘EEE method’ ie Exempt- Exempt- Exempt method. This specifies 3 kinds of exemption (1) Exemption on investment (2) exemption on interest income earned (3) exemption on withdrawal on the maturity of the account.

Period extension without a contribution

• PPF can be extended for 5 years after the initial 15-year period is complete. Thereafter, this has to be renewed every 5 years.
• Extension without contribution: Account after maturity can be retained after completion of 15 years without making any contribution. The account will continue to earn interest as per the applicable interest rate.
• No switch over after selecting non-contribution extension: Once the account is continued without deposits for more than a year, the account holder shall not have the option again to continue the account with deposits.

Period extension with the contribution

• Extension for a block period of 5 years is allowed on the completion of 15 years
• The option of extension of account has to be made by the account holder.
• No deposits in the account without the account holder opting to extend the period with contributions.

Minimum & Maximum Contribution to PPF

• Maximum amount Rs 1,50,000/- in a financial year
• Minimum amount Rs 500/- in a financial year
• Deposit of any sum in multiples of Rs 50/- shall be made

Where to open a PPF Account

PPF account can be opened in any branch of the Post office or any nationalized banks including few private banks.

Who to open a PPF Account

The following can open PPF Account:

• Individuals can open one PPF account.
• An individual may also open 1 account on behalf of each minor or a person of unsound mind of whom he is the guardian.
• Joint account shall not be opened under this Scheme
• Also, HUF (Hindu undivided family) cannot open PPF Account

How to open a PPF Account

PPF account can be opened either through online or offline mode. A new PPF account can be opened by applying in Form No 1.

The following documents are required for opening a new PPF account:

• Passport size photograph
• KYC documents (‘Know your customer’) of the subscriber
• Address proof
• Nominee declaration
• PAN Card

Loan against PPF

• Loan can be taken on PPF amount between 3^rd and 5^th year.
• Amount up to 25% can be taken as a loan on balance 2 immediately preceding years.
• Person can apply for a loan in Form-2.
• Subscriber shall not be entitled to get a fresh loan so long as earlier loan has not been repaid in full together with interest thereon.
• An account holder shall be entitled to only one loan in a year.

Repayment of Loan and Interest

• The principal amount of a loan can be repaid within 36 months of the first day of the month following the month in which the loan is sanctioned.
• Interest on loan has to be paid in not more than 2 monthly installments at the rate of 1% per annum after the principal amount of the loan is repaid.
• The interest on the amount of loan outstanding and any portion of interest payable, but not paid, on any loan, the principal amount of which has already been repaid within 36 months, may, on becoming due, be debited to the holder’s account.
• Interest recoverable shall accrued to Central Government.
• In case of death of the account holder, the nominee or legal heir shall be liable to pay interest on the loan availed.

Partial PPF withdrawal

• PPF can be withdrawn after the completion of 15 years. Also, partial withdrawal can be made before completion of 15 years.
• After completion of 5 years, the account holder can withdraw up to 50% of the amount available at the end of the 4^th year. The withdrawal application can be made in Form-2.
• In case of the account of a minor, the guardian can apply withdrawal after submitting the certificate in the prescribed format.

Closure of PPF Account

• On completion of 15 years, account holders can close the PPF account and withdraw the amount by filing Form-3.
• The accounts office shall allow the withdrawal of the entire balance along with due interest up to the last day of the month preceding the month in which the account is closed.

Pre-mature closure of PPF Account

Premature closure of PPF account is allowed on the following grounds:

• treatment of life-threatening disease of the account holder, his spouse or dependent children or parents, on the production of supporting documents and medical reports confirming such disease from treating medical authority.
• higher education of the account holder, or dependent children on the production of documents and fee bills in confirmation of admission in a recognized institute of higher education in India or abroad.
• on change in residency status of the account holder on production of a copy of Passport and visa or Income-Tax return.

The procedure of PPF withdrawal

PPF can be withdrawn either partially or fully with the following steps:

Step 1: Form C to be filled up duly incorporating relevant details

Step 2: Submit the application form to the bank

Public Provident Fund (PPF) Form-3 (Form ‘C’)

Form 3 is an application for withdrawal of PPF and it has 3 sections:

• Declaration section
• Office use section
• Bank detail section

PPF Form-4 (Form ‘H’)

Form-4 is an application for continuance of account under Public Provident Fund 1968 beyond 15 years. Thereafter, after every 5 years, extension application can be made by filing ‘Form-4’.

Annexure ‘A’ – Rate of Interest on PPF for earlier periods

Financial Year	Quarter / Period	Return (per annum)
2020-2021	April 2020 – June 2020	7.10%
2019-2020	January 2020 – March 2020	7.90%
2019-2020	October 2019 – December 2019	7.90%
2019-2020	July 2019 – September 2019	7.90%
2019-2020	April 2019 – June 2019	8.00%
2018-2019	January 2019 – March 2019	8.00%
2018-2019	October 2018 – December 2018	8.00%
2018-2019	July 2018 – September 2018	8.00%
2018-2019	April 2018 – June 2018	7.60%
2017-2018	January 2018 – March 2018	7.60%
2017-2018	October 2017 – December 2017	7.80%
2017-2018	July 2017 – September 2017	7.80%
2017-2018	April 2017 – June 2017	7.90%
2016-2017	October 2016 – March 2017	8.00%
2016-2017	April 2016 – September 2016	8.10%
2015-2016	April 2015 – March 2016	8.70%
2014-2015	April 2014 – March 2015	8.70%
2013-2014	April 2013 – March 2014	8.70%
2012-2013	April 2012 – March 2013	8.80%
2011-2012	April 2011 – November 2011	8.00%
2011-2012	December 2011 – March 2012	8.60%
2010-2011	April 2010 – March 2011	8.00%
2009-2010	April 2009 – March 2010	8.00%
2008-2009	April 2008 – March 2009	8.00%
2007-2008	April 2007 – March 2008	8.00%
2006-2007	April 2006 – March 2007	8.00%
2005-2006	April 2005 – March 2006	8.00%
2004-2005	April 2004 – March 2005	8.00%